“With all the recent problems in the financial sector, is it getting easier to settle with the banks?” I’ve been hearing this type of question a lot lately. The past year or so has seen an avalanche of economic problems, beginning with the downturn in the real estate market, the subprime mortgage fiasco, the banking credit crunch, liquidity problems, the Fed shoring up the economy with multiple interest rate reductions, the bailout of Bear-Stearns (the fifth-largest investment banking firm on Wall Street), and so on. It’s logical for consumers considering debt settlement to wonder if all this grim news is “softening up” the credit card banks for better settlement deals.
The answer is, well, “no and yes.” No, because overall, it’s really just “business-as-usual” in the settlement industry. I personally have seen no drastic changes in settlement practices as a consequence of recent economic problems faced by the banks. You have to remember that we’re talking about huge companies, and they do not change direction quickly or easily. If you’re in a small sailboat, it’s pretty easy to turn and start tacking in another direction. However, if you’re in a massive oil tanker, it takes a long time to safely change direction. (Just ask the guy who piloted the Exxon Valdez into the coast of Alaska.)
On the other hand, some creditors have softened up a little, so that’s the “yes” part of the answer. But it’s important to understand that the banking industry is not one big monolithic enterprise. Different creditors behave differently. So while some of the banks seem to be slightly easier to settle with lately, others have gone in the other direction and stiffened their resistance to losses. Generally, this all translates to somewhat lower settlement percentages with some banks, and somewhat higher percentages with others. So overall, nothing much has changed from my own perspective, where I deal day-in and day-out with a wide range of consumer debt obligations.
Bottom line: It’s still the same game as it ever was, and consumers should not count on “extra” help from the banks they’re trying to settle debts with. As time goes by, current economic conditions may yet have a deeper effect on settlement practices, but so far there has not been much of a noticeable difference.
How does making a settlement with Credit Card Company affect your credit score
verses claiming bankruptcy?
Debt settlement is not public record like bankruptcy, so the dings associated
with it will remain on your credit report for 7 years versus 10 years for BK.
However, from a practical “real world” perspective, most people get credit again
within a couple of years of having completed either process. Another way to look
at it is that debt settlement is like a “D-minus” on an exam, versus an “F” for
bankruptcy. Not enough of a difference to be the sole basis for deciding which
route to go.