Stimulus money has been the most talked about topic in the credit card industry. How is it really related to credit cards? Frankly, the recession has been the biggest financial crisis the government has faced since the Great Depression. The nation took notice and it became one of the most debated issues in the presidential elections.

As promised, the Democrats have pushed a huge stimulus package into the economy to help financial institutions. Apart from this money will go to financial institutions to get them out of trouble. These institutions have received very strong instructions from the government to reduce their exposure to unsecured debt. As part of this exercise they seek to close the accounts of a large number of creditors.

If the credit companies do not react and remain calm, they will continue to increase their exposure to unsecured debt. Since the debt is not covered or backed by any assets, they may lose the full amount to the debtors. It is not likely that most debtors have substantial non-exempt assets. It means that Creditors will receive very little money from the bankruptcy proceeding. This is where the stimulus money comes into play.

The government wants card companies to offer debt settlement. In a debt settlement, negotiations are held with the credit card company to reduce the net outstanding debt. Typically, the user pays 50 percent of the outstanding net balance. The other half is canceled by the credit card company. However, credit card users must have more than $10,000 in unsecured debt to qualify for a debt settlement. With a debt settlement it is a win-win situation for both parties. Creditors benefit by recovering 50 percent of the debt. Debtors can win by legally eliminating 50 percent of the debt.