Those consumers hit by the credit crisis should consult with a bankruptcy attorney for strategies on how to ride out the rest of the wave.

Just over a year after investment bank Lehman Brothers collapsed, the hard-hit credit markets are still picking up the pieces from the financial fallout and trying to make sure a similar credit crisis doesn’t strike any time soon.  In the meantime, the face of the credit industry and borrowing has gone through some major changes.

After Lehman’s failure, a rash of money market and hedge fund managers were forced to declare bankruptcy, and derivative deals with corporate bondholders entered a state of indefinite limbo.  This lead to fear of additional bank failures which choked credit and lending markets even further, all-but-freezing the formerly massive lending market.

Today’s borrowing environment means that corporations must pay much higher capital costs than in the glory days of the past few years prior to the current crisis, despite the fact that U.S. interest rates have in many cases been slashed down to nearly zero.  Many companies now have tight credit caps that mean they can no longer take as many risks on new business ventures or expansions on existing business, which is not good news during an economy seeing U.S. unemployment rates skyrocketing to 26-year record highs.

One indicator of just how risky lending has become is the fact that Moody’s Investors Service actually downgraded ratings on an astonishing $3.5 trillion of U.S. corporate debt last year, after heightened concerns that companies would be unable to pay back later what they’re borrowing today.

Today’s credit crisis presents plenty of headaches and challenges for investors, consumers, and companies alike.  According to an article by Reuters (http://www.reuters.com/article/businessNews/idUSTRE58A2OZ20090911), corporate officers like Scott Morrison, treasurer of Broomfield, Colorado-based Ball, must now spend much more time securing bank commitment letters and build up relationships with banks.  On the flip side, banks now have to diversify their business endeavors in order to limit risk, although this also means decreased profit potential.

Even so, there are signs that the credit crisis may be heading in the right direction–toward recovery.  For instance, issuance has experienced a meteoric rally as investors who have demanded record high returns in exchange for taking risk on purchasing corporate debt have dipped the feet back in the figurative water of the debt pool.  Averages for U.S. junk bond investing have also soared to new heights.  In fact, investors in junk bonds have lead the pack when it comes to the performance of major asset classes on a year to date basis.

According to veteran money manager Dan Fuss, with Loomis Sayles, the U.S. recession has ended but challenges still lay on the horizon.  “We’re not out of this thing yet, but the recovery has started,” said Fuss, looking out at the wharf from his Boston harbor office. “The Titanic has stopped sinking.”

Of course, even with that said, banks face a monumental task in rebuilding balance sheets, while investors are still jittery when it comes to corporate bonds.  Most companies still do not have access to borrowing as easily or freely as they did in the early 2000s.  Then again, they might never enjoy that freewheeling access again–and it may be a good thing for the economy as a whole.

“Declining U.S. housing prices and securitization remain at the heart of the crisis and problems for the prospects for recovery,” said Matthew Tucker, head of U.S. fixed income investment strategy at Barclays Global Investors. “The core problems haven’t gone away.”

Still, at least hope is still peeking over the horizon!  And those consumers and businesses who are hardest hit by the credit crisis should consider consulting with an experienced bankruptcy attorney for strategies on how to ride out the rest of the credit crisis wave.