Over the last thirty years or so, the use of credit cards has gone through some pretty explosive growth. Back in the seventies, credit cards were only used by a small portion of the population, but nowadays, pretty much every adult in the Western world has at least one credit card or store card.
The whole philosophy of spending seems to have changed into one of “buy now, pay later”, to the extent that it is now extremely common for middle and lower income earners to have thousands of dollars of debt on their cards. This is an unsustainable situation.
Unfortunately, many people discover just how unsustainable it is when their burden of debt gets too heavy and they believe they have no option other than to declare themselves insolvent and begin filing for bankruptcy.
Obviously, any growth in bankruptcies is bad for the economy, so the government does what it can to encourage other courses of action to people who find themselves in this situation. One possible alternative to bankruptcy is debt settlement.
Debt settlement is like a kind of “bankruptcy-lite”. Although it will adversely affect a person’s credit rating, it is not as onerous on the individual as it would be if they declared themselves bankrupt. With debt settlement, the courts do not have the same rights to claim your assets as they do with bankruptcy, so you have a much greater chance of keeping your home and your possessions. Also, debt settlement does not have the same long-term impact as bankruptcy. For example, once your debts have been cleared, you are free to get bank loans again, which would not be the case if you were bankrupt (in some cases you might have to wait ten years before getting another bank loan).
There is of course the ethical/philosophical question about whether making it easier for someone to clear their debts in this way is a good thing or a bad thing, but that is an argument we won’t go into here.
Our advice? Try not to get into too much debt in the first place. Sometimes it is unavoidable, but if you’re thinking about buying luxuries and fripperies on your credit card, maybe you should think twice.