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State court figures show the number of default judgments imposed on debtors who failed to make loan payments and then did not respond to lawsuits jumped to more than 36,000 in 2007, up 67 percent the year before.
The Star Tribune reported in its Sunday editions that in Hennepin County alone, the number of default filings surged more than 70 percent to just over 9,200 in 2007, the most in at least 18 years.
“This represents all the economic failures in people’s lives,” said Mark Thompson, Hennepin County court administrator, surveying the stacks of unprocessed cases piled high on a counter on Friday. “It’s depressing.”
Art Rolnick, director of research at the Federal Reserve Bank in Minneapolis, said, “It’s one of a number of signs we’ve had over the last three months that suggests the economy has slowed considerably.”
State economist Tom Stinson said, “When economic times get tougher, people have less money and they’re more apt to be defaulting on all types of credit — auto loans, credit cards and in some instances home mortgages.”
Michael Kelly, 34, a respiratory therapist, is one of the people behind those Hennepin County numbers.
Kelly said he had OK credit until his 2004 divorce. To avoid losing his south Minneapolis house, he refinanced the mortgage to an adjustable-rate, interest-only loan. In just more than a year, the interest rate jumped from 6.875 percent to 10.875 percent.
Now pays almost $2,000 a month for the 1,000-square-foot rambler that his children have known for seven years, he said, “not some penthouse overlooking the Mississippi bluffs.” He added, “That’s insane.”
His credit card bills climbed. Court records show that he owes $3,853.73 on his Capital One card.
In the default judgment the company filed in Hennepin County District Court, lawyers also seek $482.50 in court costs, $577.95 in attorney fees and $891.28 in finance charges and interest, for a total of $5,804.73.
“I can’t afford my house. I can’t afford my credit card,” Kelly said. “Which am I going to pay?”
