With the latest numbers from the Federal Reserve indicating that Americans are facing $900 billion in credit card debt, the proposed bailout is probably a case of banks simply attempting to cut their losses. Seeing the writing on the wall as consumers deal with record unemployment rates, skyrocketing home foreclosures, inflated prices for goods and their 401(k)s tanking, these financial giants are taking action in the form of a proposed temporary pilot program in which lenders would forgive as much as 40% of the amount of credit card debt consumers owe.
The proposal is being spearheaded by the Consumer Federation of America and the Financial Services Roundtable, and has the support of the most of the major players in the credit card banking circus (I mean circuit) including Discover Financial Services, American Express, Bank of America, JPMorgan Chase & Company, Citigroup Inc., and Capital One Financial. The catalyst for this rather brash action? Credit card delinquencies are skyrocketing, and issuers’ charge-offs — balances written off as bad debt — are up 48% compared with last year, according to Moody’s Investors Service.
The credit card debt-forgiveness plan could (initially) help an estimated 50,000 people who are in serious debt, potentially facing bankruptcy; possibly more if the pilot program is deemed successful. How much debt would be forgiven would rise according to the severity of the borrower’s financial strife, ranging from 10 percent up to a maximum of 40 percent, contingent on evaluation of the individual’s personal financial situation. Individuals qualified to receive the maximum forgiveness level would be those nearing a personal bankruptcy filing. Additionally, qualified borrowers would have to enroll in a credit card debt counseling program. Debtors would also obtain a tax benefit, deferring income tax on the forgiven debt until they’d paid off the remainder of their balances.
It appears that the credit card companies have decided that getting something out of these debtors is better than getting nothing if they stop paying or file for bankruptcy.
How can I sign up? Wait; I probably don’t qualify. How “unfair” that I can’t take advantage of any of these bailout programs since I was able to sell my home last year and make a (much smaller) profit and still pay off my credit card debt each month– so far, with only part-time employment .
Many of us can probably relate with a quote from a recent article in msn money by Liz Pulliam Weston:
Bailouts are going to reckless Wall Street bankers, to homeowners over their heads and now maybe even to Americans hooked on credit cards. Where’s the reward in doing the right thing?
I guess I’ll just have to wait until the “Main Street Bailout” for those of us that have saved responsibly for years, and just lost half of it in the stock market, comes about; unfortunately I suspect I’ll qualify for that one…. that will never happen.
Is anyone else out there starting to get a little peeved?
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WOW! I thought this was a rumour. I can understand hardship, been there done that. But now credit card bailout? How can one learn a lesson if there are bailouts all over the place?
And how can one change their mindset and learn a lesson from trial and error with living beyond our means?
Great article - thanks!
It is an amazing situation where the government will perform such large bail outs for corporates in this way.
I’ve been more than a little peeved about the whole bailout situation since before the first one passed. In comparative terms, I’m in really good shape financially - and I have almost no money, but also almost zero debt and none of it on a credit card. These bailout measures haven’t and obviously won’t do anything to affect the more difficult areas for me - gas and food prices and other inflationary concerns. If the measures actually did something for average people I’d be all for it, but they don’t, plain and simple.
We are getting a much needed wakeup call from the economy, both personally and as a nation.
But if your situation is truly dire don’t count on government help.
I’ve got debt myself and I’m really barely able to pay, however, these bailouts will push us into a depression like no other! So no, I don’t want them to bail me out, I just want a good job so I can pay my debt. Unfortunately, this economy is going to collapse and spending trillions of more money that the country is either printing or borrowing is only going to make it worse!
Well, I’m totally against the bail outs…all of them.
But since facts are facts, and the government is handing out OUR money (and it is OUR money), I’m going to try to get some. I figure I can get my share, or let the illegal aliens get it, because you know that’s next.
What goes around comes around.
I can use a bail out plan I am paying everything but struggling to pay and feed my children. These are hard time but I thank God for the blessings I have. Hey but if anyone hears anything about help with credit cards let me know.
God bless
I was doing just fine managing my debt to income ratio until the company I work for cut my salary by 50K. realizing I would not be able to make alot of payments I called every one of the companies I owed money to, in hopes they would work with me…no such luck.
My theory now is this… the whole credit system will collapse in about one year as unemployment rises the government continues to bailout companies and ignoring the citizens. we will become fed up and collectively decide that we are not paying. since the gov will clean there mess but not ours. with the American public not trusting or wanting to even deal with the credit institutions, it would be up to them to prove to us they can handle loaning money out without causing another financial mess. there by making what was such a “important” piece of your financial future a non factor(credit score)… and putting the power back where it belongs yours and my hands
I would like to know if a judgement on my debt would qualify me to the bail out or debt relief program I am in a very tight financial burden with my house in foreclosure I am 61 years old please help. thank you..
Don’t leave ou those that paid their mortage payments with cash advances on their credit cards, or those blank checks many card companies mailed out that were really higher rate cash advances. Crdit card companies also OWN many of the debt collection or consolidation companies out there. They get the bad debt off one set of books for pennies on the dollar, write of the bad debt, and then get in line for the bailout for the full amount. The banks advetised, mailed, and force-fed the lavish life style funded by unsecured credit, speculation on home values and then siphoned off their bonuses, and still went crying to the Feds while running interest rates and charges (banking’s free money)
The U.S. can forgive other counties debt, why not their own country’s citizens?
quite ashamed to be an american at the moment—
made it to retirement with the ability to keep house. at 65 am wondering if it would not have been smarter to rent my home and put my money in a safe haven
e.g. FDIC CD’s. After all unless have no mortgage payment, you really do not own the home. I am sitting on even in this market $200K in equity. Cant use it because I can’t pay for it.
Trying to decipher what is the best course for the remainder of my life.