Small businesses debt settlement - how new debt settlement policies and laws help small businesses

Small businesses debt settlement - how new debt settlement policies and laws help small businesses

Small businesses form the backbone of the economy to some extent. They help in generating revenue and also help in building up an economically stronger economy. If these small businesses are affected by any economic malice, the financial system of the economy collapses. This is what happened during the very recent recession that affected the US economy. With recession, the purchasing power of the consumers decreased and this had a direct impact on the small businesses. These businesses failed to increase their sales and they started taking massive loss. Since these small businesses depend heavily on credit, the recession caused a severe trouble for them. They failed to repay their debts on time and became defaulters. They became bankrupt. They either had to close their business and face legal consequences or they had to file for bankruptcy. Mostly they filed for bankruptcy and this was a big problem for the creditors. The creditors lost their money completely and the amount of loss that these creditors had to bear was huge. This is because of the fact that small business loans are bigger than consumer loans.

Since the creditors started incurring huge losses, they themselves nearly became bankrupt and the whole economy started suffering. The Federal government issued new laws which stopped the ever increasing number of bankruptcy filings and promoted debt settlement as an option for the small businesses to get out of debt. With settlement the small business owners managed to get rid of at least 50% of their debts. For this to happen, the Federal government came up with new policies which were meant for the creditors. According to these new policies, those creditors who agreed for debt settlement deals with the small businesses will be allowed to use the stimulus cash released in the market by the government. The government released this money to ensure that the creditors who agreed for debt settlement deals and incur loss can use the money to cover up the costs that they have. There are various kinds of costs that the creditors have and they include managerial and operational costs.

The Federal government also announced creditors' tax breaks to ensure that the loss of income of the creditors due to settlement deals can be compensated. The creditors earn interest on the credit that they give to small businesses and the consumers. When the creditors agree for debt settlement deal, they lose this interest income. Since the creditors pay tax on their income, the government decided to reduce the taxes for those who agreed for debt settlement deals. With these polices, the creditors opened up for debt settlement deals and this is how the small businesses benefited from the same.

Debt settlement is a viable option to filing bankruptcy and is becoming increasingly popular amongst Americans with over $10k in unsecured debt. Creditors are ready to negotiate. You can literally eliminate 50% of your unsecured debt with a settlement.

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