Robert Manning CBS interview Video

Robert Manning, professor of finance in RIT's E. Philip Saunders College of Business, discusses consumer debt relief program. Story does not reference RIT affiliation.

These days more people are using credit cards to pay day to day expenses hoping to stay afloat. Others are already drowning in debt. Last month more than 106,000 people filed for bankruptcy. That's up 40% from a year ago, but there's a new way to avoid all that as CBS News correspondent Priya David reports in our series Dollars and Sense.

Janine Cain prides herself on a tidy home. Her finances, however, are in a state of disrepair, ever since her husband lost his full-time job and their mortgage payments rose.

Now they're working four jobs between the two of them - but it's not enough to pay off their credit card bills.

"It wasn't any extravagant items that we went out, or jewelry, or TVs or anything like that," Cain said. "It was basically stuff to live with."

How high is their credit card debt?

"It's around $23,000 total for both of us," Cain said.

The Cains are part of a growing group economists call the "near-bankrupt."

On Main Streets across America, as jobs dry up and adjustable-rate mortgages increase, consumers are taking on more credit-card debt to try and bridge those gaps.

"The average American household has assumed unprecedented levels of debt. And they can't afford to repay all of their debt, but they could pay a portion of it," said consumer finance expert Robert Manning, author of "Credit Card Nation."

Most debt-management companies require people to repay all of their debt - or declare bankruptcy. But Manning, who works at the Center for Consumer Financial Services, says he's got a better way.

It's a formula that determines how much a borrower can actually repay, based on income, local cost of living and local taxes. The consumer avoids bankruptcy, and the lenders get some of their money back.

His innovative program is administered by two credit counseling agencies, InCharge Debt Solutions and Hope Financial. So far it's available in 25 states.

Manning's program helped save Phyllis and Barnett Hoffman's Lakeport, Calif., home.

"I was afraid, yeah we're gonna lose our place because we got three notices of foreclosure," Phyllis said.

Unable to pay their ballooning mortgage, they had racked up $50,000 in credit-card loans and owed $350,000 on the house.

"I've been through some tough times, but I never thought I'd have to go bankrupt," Barnett Hoffman said.

Using Manning's formula, the Hoffman's credit card lenders agreed to clear the couple after they repay 37 percent of what they owe. And counselors got the Hoffmans' mortgage payments of $3,000 cut almost in half, to $1,700.

"It's very important for everyone to take a realistic approach and the realistic approach is 'let's reach a compromise,'" said Adam Levin, chairman and co-founder of Credit.com.

Compromise, with this approach, means lenders recoup at least some of their losses - and borrowers get a chance to wipe their debts clean.

LOOK AT THIS.....
LOOK AT THIS.....

@lmcdowall It's one ...
@lmcdowall It's one thing to start to look into something. If that's even true. Another to do something even worse. Like was done with the man of CHANGE leading the charge. What a mess he & others have made. Every person must take responsibility for there own mess making. And stop using the name it blame it on whoever they want. They need to be man enough to say the buck stops here. Then do it with the backing of the people.

give me a break ...
give me a break people, the fact is the banks have been pushing CC on people in order to get them bankrupt, the current cash based currency system must fail in order for new world order, this is all part of the plan, socialism is part of the plan..this is why obama is in office to get everyone more dependent on the gov..we live in houses and in ways that we think we are entitled to, basic human rights, air, shelter, and growing our own food, 30 acres and a mule...watch 4 electronic currency 2011

@manhammmer UUlplz; ...
@manhammmer UUlplz;, yzxiiukj

@manhammmer By the ...
@manhammmer By the way it was Bush who started the bail outs not Obama. It would not matter what Obama did, the guy could cure cancer and Conservatives would accuse him sending doctors to the unemployment line.

@manhammmer I ...
@manhammmer I simply mean to point out that there is plenty of blame to go around. These banks are out playing "the violins", when in reality they almost destroyed the whole world economy. And the tax payer gets stuck with the bill. Many people got it coming and going. Bought a house and lost it, a year later back on thier feet and paying taxes and then the bank bail out happens.

@lmcdowall This I ...
@lmcdowall This I completely agree with as far as lender fraud. When the banks finally did see it coming, they escalated this fraudulent resale as well. Rather than prosecute all of them, our fearless leader of hope and change decided to bankroll them.

@lmcdowall While I ...
@lmcdowall While I agree the terms of those loans sucked, the banks did not know the Fed was going to raise the interest rates. Those that bought ballooning or variable rate loans knew what they were. They were making the mistake of assuming the Fed would artificially keep interest rates low. While I agree the banks have their culpability, it is the borrows responsibility to not borrow more than can be repaid nor on terms that are not favorable in the long run.

@manhammmer I guess ...
@manhammmer I guess what you are failing to see is that if these loans did not default then it was not mission accomplished. If they simply did not change the rate this whole colapse could have been avoided. Well a large part of it anyway.

@manhammmer Don't ...
@manhammmer Don't worry though because the banks divided all the loans into tranches. They sold these stinky loans to our pension funds(with fraudulent credit ratings) then they took insurance out against these "AAA" loans when in reality they were not evan mezzanine. In other words the idea was to guarantee that these loans would fail so they could reap the profits from hedging their own bets. Makes Pete Rose look like a church boy.

Don't worry though ...
Don't worry though because the banks divided all the loans into tranches. They sold these stinky loans to our pension funds(with fraudulent credit ratings) then they took insurance out against these "AAA" loans when in reality they were not evan mezzanine. In other words the idea was to guarantee that these loans would fail so they could reap the profits from hedging their own bets. Makes Pete Rose look like a church boy.

@manhammmer I ...
@manhammmer I absolutely believe there were consumers that were irresponsible, but the fraud that was committed has to do with lenders misleading the consumers as to the nature of the loan to begin with. These adjustable rate loans are designed to fail. You start off paying $1,600 a month and then two years later the rate changes and all of a sudden the consumer has to pay $4,000 a month. Clearly the consumer will default.

@lmcdowall I do not ...
@lmcdowall I do not disagree that they were committing fraud. However, CONSUMERS were a part of it too. Unless you can show me that these lenders were forging signatures and completely blinding consumers from the truth, you cannot discount their part in it. I have purchased homes. There is always a time at signing when a representative meets with you at the title office and goes over the details of the loan and the purchase agreement. Even before that, you know the terms. They LIED too!

@manhammmer You ...
@manhammmer You are not listening. The lenders were committing fraud.

@lmcdowall How were ...
@lmcdowall How were they hoodwinked? They signed paperwork that said they made more money than they knew they made. They knew at that point that they were lying. Just because they rationalized their way out of feeling like it was a lie, that does not mean they did not intentionally lie anyways. Sure, the lender made it sound attractive or minimized things, but the fact stands they made a choice to borrow more than they could afford and did so against the truth.

@manhammmer There ...
@manhammmer There is a distinction between hedgefund fraud and lender fraud. You are wrong look it up. These people were hoodwinked.

@lmcdowall Hedge ...
@lmcdowall Hedge Funds are the fraud that was the FBI concern. It was business to business resale. Now there have been several cases about lenders encouraging borrowers to lie on their apps, but go back to what I said earlier. If people would have been honest, that wouldn't have mattered. No signature, nor mortgage. These people made a choice.

@manhammmer You are ...
@manhammmer You are wrong about that the fraud was at the lender level look it up

@lmcdowall ... " ...
@lmcdowall ... "This is what I can afford, and I am not going to spend more." Had more Americans the character that their parents and grandparents had, much of the bubble burst could have been avoided.

@lmcdowall As ...
@lmcdowall As fraudulent as the companies were, which mostly pertains to the resale of the mortgages not the origination, if people would focus on doing what is right & honest, no amount of pressure would push them into a mortgage they could not afford. People are so out of tune with doing what is right & honest, it was easy for them to "state" their income and leverage every "asset" they claimed to have in order to be house poor and on the verge of foreclosure. It takes character to say,

@manhammmer I might ...
@manhammmer I might agree with you except for the fact that more than 2/3 of all the mortgage loans written during the years 2004-2005 were fraud committed on the part of the lender. That's according to the FBI. WaMu for example was one of the leaders in fraud. Infact that was the whole point they sold these bad loans and counted on the fact that they were going to default. They were designed to fail. People made billions off the failures.

@lmcdowall - Nobody ...
@lmcdowall - Nobody held a gun to these peoples' heads. It does not take that much to read a document and actually borrow within your means if you borrow at all.

She says she is not ...
She says she is not buying extra things with a TV on the kitchen counter.... While it is no flat screen, it is still extra. Seeing that makes me wonder what is in the rest of the house. While some may need this service, it is time for America to wake up and stop spending when you are out of money.

charity for those ...
charity for those who think credit cards are "instant credit" banks, nice.

do I call Hope ...
do I call Hope Financial USA ,or Incharge for the debt relief program, I want to know if I qualify for the debt relief anyone knows how this works?

If these bansk ...
If these bansk would stop adjusting their rates the country would be in alot better shape. Infact adjustable rates are in large part to blame for the crash. Soon as those rates adjusted we started to see people default on there mortgages.

Robert Manning is ...
Robert Manning is the type of man America needs in politics. Thank you for doing this work and speaking out.