Personal Finance – How Stimulus Money Has Provided the Option of a Personal Debt Bailout

Personal debt always makes a humble beginning as your first purchase on your credit card. It feels great when you buy using the power of your credit card. What you do not realize at that time is you are bound to pay the bills at the end of the month. The credit card companies expect consumers to pay only minimum amount so that they continue to pay exorbitant rates on their outstanding amounts. This is their secret of making money and getting gullible people like you into debt.

The government is also trying its best to combat the recession. The government has offered stimulus money for ailing financial institutions to get out of financial trouble. The institutions will be using this to move out of bad debts and investments that can still be recovered and turned around. The concept when applied to debt relief is quite useful.

Traditionally credit card companies have recovered very little money on delinquent accounts. Once a user has declared bankruptcy it is quite difficult for the credit card company to recover any money at all. First of all it is a legal procedure. The credit card user may not be having any assets at all to back up his unsecured credit. Many states offer unlimited homestead protection. Millions of dollars have been parked in home equity by users who have filed bankruptcy.

Creditors would prefer to go in for debt settlements instead. Part of the stimulus money helps them to offer settlement packages to their clients. Credit users looking for debt relief are welcome to pay only 40 to 50 percent of their outstanding. Balance amount is waived by the creditors. In most cases it includes the interest liability and late fees. Thus the credit card companies are able to recover at least a portion of the outstanding amount.

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