Consumer Debt Reduction Tips - How Stimulus Cash Can Help People Get Out of Debt

Consumer Debt Reduction Tips - How Stimulus Cash Can Help People Get Out of Debt

Debt relief is never easy. You need to make considerable efforts to get out of debt. The recession has brought in a new set of dynamics in the game of debt relief. What you need to understand is the recession has hurt the power brokers and the financial institutions more than the Credit card users.

Debt has always moved in a concentric circle of borrowing. Credit card users keep utilizing their credit limits. They spend more than what they can pay back. Since they can not pay back the entire amount they opt to pay only the minimum amount each month. Interest charges start piling up from the very first day and finally become a mountain. Credit card users borrow from other sources and go in for a balance transfer. This vicious cycle of debt would go on for ever and the creditors made a pile of money.

What went wrong with the recession that most Credit card users lost their regular source of income. With no income coming in most debtors started heading the bankruptcy way. Just imagine 80% Credit card users filing for bankruptcy. This meant the Creditors will get nothing from 80% of the users. With this scenario there was a serious threat of the economy breaking down completely.

The US government decided to introduce a stimulus package to boost the financial institutions and prevent them from breaking down. Part of this stimulus money is being utilized by the Credit card companies to offer debt settlements to the users.

An out of court settlement is negotiated with the user. The user is offered a waiver of up to 50 percent of the net outstanding amount. In exchange he is to pay the balance 50 percent in one go. Thus the users get to eliminate their debt legally and creditors are also happy to recover some amount from the debtors. This is how you can benefit from the stimulus money.

Debt settlement is a viable alternative to filing bankruptcy. Most consumers are able to eliminate at least 60% of their unsecured debt while avoiding many of the negative consequences with filing bankruptcy. If you are over $10k in unsecured debt you will be eligible for debt settlement.

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