If any of these explanations made sense to a twelve-year-old, then I mourn for childhood.

I was thinking more like:
Well, you get an allowance, right? And sometimes you get an advance on your allowance, but then you have to go without any more for a few weeks, right? To pay it back.
Well, some people took really big advances and pretended they were rich and bought lots of stuff that they have to keep making payments on. But they never had enough allowance coming to cover all the payments, and they can't get any more advances.
So whoever sold them all the fancy stuff wants it back.
But all that person can do with it is sell it, and nobody else has any money because no mums and dads are giving allowances right now. So no-one is buying it.
So now, people have to give back their fancy stuff, AND keep paying back their advance, and the fancy stuff is just sitting somewhere not being used.
That fancy stuff is people's houses. That's why this street has so many windows boarded up, and homeless people under the bridge.

Eh, maybe I'm giving you the eight year old version. Down Under, kids don't learn finance and economics until they're ten.

thats not too bad Zen - I kinda like it