The Effect Of Difficult Economic Times And Its Impact On Debt Settlement

by Mark Brinker

During the past couple weeks, numerous people (both clients and colleagues) have posed the following question to me:

With the U.S. and global financial markets presently experiencing a lot of stress and turmoil, how do you think that’s going to affect credit card companies’ willingness to settle for less than full balance on delinquent accounts? 

At first glance you might be tempted to say, “Gee, in difficult economic times with so many people struggling financially and unable to pay their bills, credit card companies would probably be very eager to accept just about anything they could collect.” However, my experience actually suggests just the opposite.

What I’m saying is that when we are in a challenging or recessed economy, it is common for large financial institutions to actually be less willing to write off a substantial portion of the debt that you might owe just because profit margins aren’t what they used to be (when the economy was booming).  In other words, when profit margins are down they just can’t be as generous in writing off large amounts of debt.

Now that’s not to say that you still can’t obtain settlements for less than full balance on delinquent accounts when we’re in a tough economy. Quite the contrary. It’s just that you might have to work a little harder because creditors might put up more resistance than usual because their coffers are not as full and there’s less margin for error. When the economy rebounds, it’ll more than likely return to business as usual.

Just my opinion and observation after working in this industry for over 12 years.

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