Unexpected illness or injury can quickly drain a family's savings. Personal savings rates in the United States have steadily declined since 1980 — when the average savings rate was 10.4 percent — to a rate of 0.5 percent in 2005, according to the U.S. Department of Commerce, Bureau of Economic Analysis. To put the savings decline in perspective, Americans now spend more than they earn, and that has not occurred since the Great Depression. It is the lack of savings and the absence of a financial cushion in case of unexpected loss of income that contributes to mortgage delinquencies and foreclosures when a family suffers an unexpected illness or injury. In the case of a serious injury that prevents a homeowner from working, the first step should be to see the lender immediately to start a dialog. Don't wait for that first missed mortgage payment to occur. Be prepared to provide your lender with any requested documentation, and if the injured person is entitled to receive some disability income or worker's compensation, don't assume it will just arrive in the mailbox. Follow up with the providers to ensure the income is provided and tell your lender how much it is or will be. The more diligent you are in your efforts to pay your mortgage or part of your mortgage, the more willing you may find your lender in helping you manage your family crisis without having to worry about losing your home. While working through the steps of purchasing a home, financial planning for injury or illness usually does not enter into the home purchaser's mind. However, not planning for the unexpected can be what leads to loan delinquency, foreclosure and ultimately bankruptcy. In a 2005 Harvard study, nearly half the respondents cited that they filed for bankruptcy due to medical reasons, and more than 25 percent said they filed for bankruptcy specifically because of illness or injury.
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