Debt: The next big American crisis?

Chris Hansen Correspondent • Profile

America's Great Recession, 20 months and counting, has created a new, unrecognizable economic landscape. Foreclosures continue to melt away the American Dream. Millions have lost their jobs.

Elizabeth Warren, Harvard Law Professor: Middle class America is under attack.

Signs of stability on Wall Street are becoming evident, but those who are still crawling out from under the financial wreckage carry the weight of a burden shared by millions: staggering debt.

Elizabeth Warren is a Harvard law professor and a leading expert on consumer debt.

Chris Hansen, Dateline NBC: Is this the next crisis?

Elizabeth Warren: It's not only the next crisis, it's the now crisis.

Americans now owe an unprecedented $2.5 trillion, and there is little sign of that going down much soon. So how did we get here?

Vicki Herrington: Ah, this is a big one, $125,311.50.

Vicki Herrington's story is sadly typical. Like so many people, she is drowning in debt.

Vicki Herrington: Our telephone was shut off. Our cable's been shut off. Our electric's been shut off.

Not long ago, Vicki and her husband Jim were doing fine with two steady paychecks. Vicki's son Ryne was in his first year of college.

Vicki Herrington: We were doing okay. But when my son got sick, our whole life changed dramatically.

Medical bills are a leading cause of debt in America. And as the Herrington's discovered, they were just one serious medical emergency away from financial ruin.

In 2005, Ryne was diagnosed with a rare form of Lymphoma. By the time doctors caught it, the cancer had spread to his brain.

Vicki Herrington: A lot crying, a lot of praying on the floor.

Luckily, they had health insurance. But Vicki stopped working to be by her son's side during chemotherapy - and the bills began piling up. Credit cards were an easy stop-gap.

Vicki Herrington: We had to use credit cards because it was the only way to survive.

And when Ryne's treatment topped $2 million, their insurance maxed out - and the really big bills started rolling in.

Vicki Herrington: These bills are for chemo again - $111,375.

The good news is that Ryne's cancer is in retreat. He's in remission and back at college. But the illness has left the family destitute.

Chris Hansen: And how much outstanding medical debt do you figure you have as we sit here today?

Vicki Herrington: $100,000.

Chris Hansen: $100,000?

Helpful links for consumers Facts for Consumers with Debt (Federal Trade Commission) Managing Your Debts: How to Regain Financial Health (Consumer Federation of America)

Vicki Herrington: Uh-huh.

Halfway across the country in Minnesota, the Snyder family is in economic freefall for another reason: job loss.

Chris Hansen: How stressful is this for you?

Chriss Snyder: It's very stressful. You think about it every day.

Chriss's husband Matt, a plumbing contractor, was recently laid off. Getting by on her one salary has them hanging by a thread.

Chriss Snyder: You're robbing Paul to pay Peter. What can I pay out of this check? And what's gonna have to wait till the next check?

Credit cards are now a lifeline for the Snyders as they desperately try to stay afloat. Like so many victims of the economic crisis, they are also struggling to hold onto a home that's worth less than what they paid for it.

In debt? Know your rights Debt Collection FAQs: A Guide for Consumers | Facts Read the Fair Debt Collections Practices Act (.pdf)

Chriss Snyder: The house across the street is for sale for a hundred thousand less than what our house is mortgaged for.

They've also got a car loan, student loans, and credit card debt that's $25,000 and growing.

Chris Hansen: (looking at credit card statement) You still have to use this card once in a while to get by.

Chriss Snyder: I do. I've got my car insurance, and-- Target. That was groceries.

Where to turn for help Consumer Action, a non-profit education and advocacy organization for consumers Federal Trade Commission: Facts for consumers i-Village debt support group: Support and information from others dealing with debt National Association of Attorneys General: Find out how to contact your state attorney general to make a complaint about a debt collector National Association of Consumer Advocates, a nationwide organization that represents victims of abusive business practices National Consumer Law Center, an organization that defends consumers and promotes marketplace justice Bud Hibbs: Consumer advocate site with tips for dealing with debt collectors

Chris Hansen: Gotta eat.

Chriss Snyder: Gotta eat. Gotta have car insurance.

Harvard's Elizabeth Warren says that too many Americans today are like the Snyders and the Herringtons: accumulating debt, not wealth.

Chris Hansen: Should we feel sorry for people who are buried in credit card debt?

Elizabeth Warren: To me, it's not about feeling sorry. It’s about understanding the economic realities. The median American family has tried to hold on to an American Dream that their parents could easily afford on one income, and today's family can't pay for on two. They need to make it to the end of this month. And if plastic is the way to do that, that's what families have been doing.

And that means more and more families are sinking deeper into financial quicksand.

Vicki Herrington: All of this is very overwhelming, to know that you may never ever, ever, ever, see the bottom.

Chris Hansen: How long is it gonna take you at this rate to pay off that credit card?

Chriss Snyder: I'm on the lifetime plan at this point. I'll probably be retired.

So who's profiting from this lifelong cycle of debt? We'll show you how the credit industry makes debt pay.

Elizabeth Warren: The credit card companies have put the loan sharks out of business.

And, we'll go inside the debt collection business to see how far some will go to get a piece of the action.

MORE FROM THE HANSEN FILES

The Hansen Files Section Front

The few, the proud, the green: Eco-cops   The debt investigation continues   Debt trap: View original report   From radical to reformer: A new mission Inside the terror plot that 'rivaled 9/11'   From respected school teacher to FBI's most wanted New details on teacher on Most Wanted list See FBI's map of his whereabouts   Inmate scams widows out of thousands The Hansen Files Section Front   Add The Hansen Files headlines to your news reader: