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BillSavings > Blog > Debt Solutions > Handling Debt: A Recessionary Guide

BillSavings.com Blog

Handling Debt: A Recessionary Guide

How To Manage Debt In A Recession

Posted By Frank

If there was one thing that defined the last few years of our society, debt would have to be up there neat the top of the list. Over the past few years, consumers and the government alike borrowed their way out of a recession and into an era of temporary prosperity. This was all well and good for awhile, with consumers constantly buying up inflated homes while lenders created exotic securities to facilitate our lust for borrowing. When all was said and done though, and our tab was finally called, we plunged into one of the worst recessions in recent memory. As we now struggle to pick up our pieces, debt is once again on our mind, though from a much different perspective.

Surprisingly enough, consumers do tend to lessen debt loads during a recessionary period. When you never know when your next paycheck could be your last, your appetite risk is understandably lessened. This will probably explain why consumer credit card debt has plunged at an annualized rate of 9.7%. While disconcerting for retailers and other industries like automakers who rely on consumer borrowing to keep sales going, this is actually a healthy tonic for our debt hangover. Less debt means more flexibility and versatility if conditions continue to worsen. It will also leave consumers on firmer footing if an emergency expense strikes.

Of course as consumers look to cut down on their debt loads, the business of debt settlement has grown exponentially. The idea is that these companies will help to negotiate with creditors to settle debts for less than what is owed. It provides an attractive solution for a debt-drowned consumer, but regulators aren't convinced of the merit of these firms. Many charge high fees and use deceptive practices, and oversight of the industry is hard to come by. That's soon to change, but as a precaution always research any firm that you may do business with for the purposes of debt settlement. Alternatively, there are a plethora of resources available (most free) online that will help you chart your own course out of debt.

Category: Debt Solutions

4/14/2009

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