Stimulus money has been the most talked of subjects in the Credit card industry.
How is it really connected with the Credit cards? To tell you frankly the recession has been the biggest financial crises faced by the government since the Great Depression.
The nation took notice of it and it became on of the most debated issues in the presidential elections.
As promised the Democrats have introduced a huge stimulus package in the economy to help out the financial institutions.
A part of this money will be going to the financial institutions to get them out of trouble.
These institutions have been given very categorical directions by the government to reduce their exposure to unsecured debt.
As a part of this exercise they are looking to close in the accounts of a large number of creditors.
If the Credit companies do not react and keep quite they will keep increasing their exposure to unsecured debt.
Since the debt is not covered or backed by any asset they may loose the entire amount to the debtors.
Most of the debtors are not likely to have any substantial non-exempt assets.
It means that Creditors will receive very little money from the bankruptcy proceedings.
This is where the stimulus money comes into play.
The government wants the card companies to offer debt settlements.
In a debt settlement, negotiations are carried out with the Credit card company to cut down the net outstanding debt.
Typically the user pays 50 percent of the net outstanding.
The other half is written off by the Credit card company.
However the Credit card users need to have more than $10,000 in unsecured debt to qualify for a debt settlement.
With a debt settlement it is a win-win situation to both the parties.
The creditors benefit by recovering 50 percent of the debt.
The debtors stands to gain by eliminating 50 percent of the debt legally.