Credit Card Bailout … Your Lucky Day?

by Mark Brinker

During the past several weeks, one question that clients and prospective clients have been asking me every single day is, “What effect is the current financial crisis in the U.S. (as well as the rest of the world) going to have on my ability to obtain a settlement for less than full balance with my credit card company?”

My reply >> “It’s probably not going to change much at all, at least for the foreseeable future.”

As I probe a little further and delve beneath the surface, what I believe many people are asking me in a roundabout way is …

1. Do you think that maybe my credit card company will go bankrupt like Lehman Brothers and I could get off not paying anything?

2. Do you think that maybe the banks are hurting so much for money right now that they would take just about anything they could get, and maybe I could lucky and settle my account in full for say $0.10 on the dollar?

3. Is there some provision in the recent $700 billion government bailout package that allows for credit card debt relief for consumers?

I wish I had better news for you, but unfortunately the answer to all three questions is no.

For the past decade I’ve witnessed peaks and valleys in the strength of our economy, although nothing like we’re presently going through, and the effect of a credit card company’s willingness to grant debt relief on outstanding balances has been negligible. Strange, but true. It’s stayed pretty consistent in good economic times and bad.

Certainly there have been periods where various credit card companies and collection agencies go through a temporary cash crunch, so they might temporarily loosen their settlement guidelines just to get some quick cash in the door. But the key word here is temporary. Remember, financial institutions are not in the business of permanently taking large losses.

What I continually tell people is that if you are having financial difficulties and you are seeking debt relief by attempting negotiated settlements with your credit card companies for less than full balance, you need to make that decision based upon how things are today regardless of what events may or may not happen in the future. If some massive bailout occurs in the future regarding credit card debt relief, that’ll be a bonus and you’ll certainly hear about it on the evening news.

If our global financial crisis worsens, things might change dramatically regarding credit card debt relief. But if things do dramatically get worse, I think we’re going to have more serious problems to deal with than outstanding credit card debt.

For now, though, it’s still business as usual with regard to credit card debt relief.

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