The Current Financial Crisis and its Impact on Debt Settlement

    Hello, America. It seems our excess has finally caught up with us. It’s not surprising that this would eventually happen. When an economy is constructed not on value, but on debt; it is virtually inevitable. It should be clear now that that the 9 to 1 lending ratio (this means a bank can lend 9 dollars for every dollar it actually possesses) has lead to a disastrous meltdown of the economy. When money is lent that doesn’t actually exist, you have, in effect, created new money. While this will work for some time, anybody can see that this is the ultimate pyramid scheme. When eventually there is not enough value in the economy to offset the debt, the pyramid crumbles. This is what we are witnessing now. Unfortunately, this is only the beginning. The only way to really fix the problem is to stop spending money that doesn’t exist. That is not likely to happen. So what happens next? The debt settlement industry is a fairly new species in the marketplace jungle. It is the result of years of financial abuse by the banks and credit card companies. Had the abuses been less frequent (not likely to happen when greed is the overwhelming motivating factor within our financial institutions) debt settlement would have still come about, albeit at a later date. There is simply no way to get around the problem that occurs when you spend money that you don’t have. So why are banks and credit card company’s now so willing to settle? There are many reasons for this: First, they have realized that all of this money that they have created is not going to come back to them. So they are now willing to take whatever they can get. Sending these toxic loans to collections or law firms results in far less payback than they can get thru debt settlement, and is now leading to virtually no payback at all. This practice was formally a useful deterrent to not paying back a debt, and even though it resulted in less money for the banks or credit card company, this was outweighed by the fact that people wanted to keep their credit in good standing. This is becoming less and less the case because people simply do not have the money to pay back these loans. Now the banks are finding that the best way to recover any portion of the loan is thru debt settlement. The banks are even going forward with debt settlement themselves. Many banks and credit card companies are now offering settlements to consumers with delinquent accounts. They would rather try to collect some of the debt than selling the (practically worthless) “paper” to a law firm or collection agency for 10 cents on the dollar. Again, realize that this system was originally set up as a deterrent to not paying and that this loss was more than made up for by the people that do pay. This is no longer the case. It is becoming more obvious that this practice loses more money than it intimdates people into paying. So you will now hear that banks are offering settlements, but these usually will not be as good as a settlement you can get when you hire professional help. Still, it is a major and welcome change in the attitude of the financial industry. What is not so welcome is that these companies are also asking to be included in the $700 billion federal bailout. Are you not angry yet? The same companies that got us into this mess are asking that we get them out of it, with our money. Do you think that they will simply forgive the debt owed to them after they are bailed out? No, they will simply push that money into extending more credit, at this ridiculous lending ratio, perpetuating the problem even further. You can read more about this here: http://money.cnn.com/2008/11/12/news/economy/paulson/index.htm http://money.cnn.com/2008/11/12/news/companies/amex_funds.ap/index.htm?postversion=2008111208 They intend to get their money one way or the other, and if we bail them out now, they will have gotten our money (although it won’t be at the 30% interest rate they so unflinchingly charge us) and will still go after the money that is technically owed them. Only now that they are not in the red, they won’t be so willing to settle. This is the state of affairs in this country. Nobody should feel any guilt about being unable to pay these loans; they were created with a predatory mindset that was bound to fail when all the game was hunted to death. These companies must be allowed to fail, or be willing to work out a survival plan that benefits not only them, but the consumer as well. Debt settlement is a practice as old as the concept of money itself, and now that this country is so buried in debt, must be allowed to take its rightful role in the marketplace in order to stave off complete financial collapse. Bailing them out is not the solution, because we are bailing them out with value that we, as a people, created; in order to compensate for the debt that they, as an industry, allowed to grow without limit. There is only so much “value” to go around and if we use that “real” money to cover exponentially escalating interest, late fees, and penalty fees then that value suddenly becomes as worthless as the money created by these loans.