Credit Card Delinquencies Rise

As unemployment creeps upward, credit card delinquencies are rising too. According to the most recent data collected for the Fitch Credit Card Index, credit card delinquencies – those accounts that are more than 60 days past due – have risen 36 percent in the past two quarters. An executive at Fitch Ratings says that this level of loss for credit cards is "unprecedented."

In February 2009, credit card write-offs increased to nearly 9 percent, a 20-year high. Many analysts fear that job losses will reveal consumers whose debt loads are so high that traditional means of debt reduction won't be very effective in helping them get a new start.

Standard repayment plans may ask the consumer to repay 2-3 percent of their debts off each month in exchange for more favorable terms like lower interest rates or frozen account balances. With consumers who carry an extremely high level of debt, even these comparatively low payments may exceed their earning capacities.

With changes to the bankruptcy laws in the US, which took effect in late 2005, consumers are now waiting much longer to seek help. While the average household carries about $11,000 in credit card debts, the average consumer looking for assistance commonly has balances that exceed $25,000.

These overwhelming credit card debts are leaving consumers looking for better repayment options, as well as options that can help them cope with job losses and reduced incomes.

There are no easy fixes in place. In April, President Obama lobbied credit card industry executives personally at White House meetings, where they were told that Congress is preparing additional regulations that are consumer-friendly. Proposed changes include requiring cardholder agreements to be presented in "plain English"; limiting or prohibiting sudden or unmotivated interest rate increases; simplifying interest rate calculations; and curbing the issuers' ability to increase minimum payments without sufficient notice to the cardholder.

Stiffer regulations for credit card issuers have already been passed by Congress, but don't take effect until July 2010. The pending legislation would make some of the approved reforms effective immediately.

Retirement Saving In Recession: It Still Makes Sense

No one is going to argue that times are tough these days. Most people need to stretch their dollars as much as possible to squeeze in all of the necessities. Wages have been largely stagnant for the better part of the last decade, meaning that there are fewer discretionary dollars available for spending.

There's no law that requires you to save for retirement, though many employers now require participation at some level in company-sponsored retirement savings plans. Most companies that have a 401(k) plan offer some kind of matching incentive. In the past year, some big-name corporations have suspended their 401(k) matching grants, but in all 99% of companies that were matching last year at this time are still matching this year.

Under the circumstances, should you continue to save for retirement? Probably. Most 401(k) investments are based in stocks or a mixture of stocks and bonds. Historically, the stock market has risen in value over time. At the moment, the decrease in the value of retirement funds and investments may mean a loss for your past investments, but also represents an opportunity to buy investment-grade securities effectively at a discount.

Moreover, your only opportunity to save for retirement is during your working years. Ideally, you should start saving while you're in your prime. If you need to slow down at work as you get older, or experience health or other issues that prevent you from working to your full potential, your retirement savings will continue to work and generate income for you.

If you wait until you're in your mid-30's, 40's or later to start saving for retirement, the likelihood that you'll be able to amass enough cash to carry you through your retirement is slim. Regardless of the state of the economy, you should continue to save for retirement no matter what the economic circumstances are and how much you can put away. Something is always better than nothing.

One caveat: consider creating a broad retirement portfolio that includes a mixture of tax-deferred and taxed assets. One thing you'll want to avoid is being completely dependent on tax-deferred retirement assets. If you maintain some portion of retirement assets that are taxed, you'll have more choices available to you if you need to retire early or withdraw the money for some other reason.

Can You Stop Foreclosure?

If you're a homeowner in financial trouble, and your mortgage is one of the many that will slip into foreclosure this year, you may be looking at strategies to stop the foreclosure process. There are just a few ways to stop foreclosure, but the process is stoppable, sometimes even after a house has been sold.

The most effective way to stop foreclosure is to bring your mortgage payments current. The bank cannot foreclose on a mortgage in good standing, so bringing your payments current is a sure-fire strategy to stop foreclosure. Unfortunately, if you're experiencing unresolved financial troubles, this may not be possible. The loss of a job, a reduction in income or an increase in the amount of the mortgage payment may put your house out of financial reach for you. Before letting your house slip into foreclosure, talk to the mortgage holder to see if they can offer some type of modification that will make paying your mortgage easier.

Another way to stop foreclosures is to sell the property. The sale of the property will satisfy your obligation to the bank, provided that the sale price is sufficient to cover the amount owed. In today's tight real estate market, getting your asking price for a property can be tough, and in some cases downright impossible. If you're "upside down" on your mortgage – that is, you owe more than the property is worth – a short sale may provide you with an opportunity to sell the property at a reduced price and receive some loan forgiveness from the mortgage holder. There are many intricacies to negotiating a short sale, so you'll want to consult an expert if this is the route you plan to take.

Bankruptcy will also temporarily halt a foreclosure proceeding, but declaring bankruptcy to avoid foreclosure is a clear-cut case of jumping out of the frying pan and into the fire. When everything is said and done, the bankruptcy court can still order the sale of your home under certain circumstances, so keeping your home in bankruptcy isn't a given.

After the lender has foreclosed on a home, most states permit the homeowner to "redeem" or reclaim the property for a certain period of time. Only a few states have "strict foreclosure" rules that don't permit redemption. The redemption period varies by state, but if your lender has foreclosed on your property, and you can come up with all of the money you owe, you can reclaim ownership on the property. Redemptions can and do happen, but most homeowners don't redeem foreclosed properties.

Debt Settlement Can Achieve Permanent Debt Relief

If you've lost your job, had a medical emergency that your insurance didn't cover (if you were insured at all) or for some other reason now face a growing mountain of debt, the promises of a debt settlement company might look very attractive. But are they for real?

When considering debt settlement, it's important to keep your expectations realistic. Be wary of debt settlement companies that promise you a specific percentage reduction in your debts. Ask for statistics on the average settlement the company negotiates in both percentages and dollar amounts. Also understand that each negotiation will be different. Some creditors will be eager to settle a debt; others will hold out for a higher payoff.

Your credit report will likely reflect some negative information regarding the settlement. In all likelihood, the debt will be reported as settled, rather than paid as agreed. This isn't the worst thing in the world. This information will become much less relevant over time, if you resume (or develop) good credit habits. These include paying bills on time; keeping your debts proportional to your income; and resisting the urge to ask for more credit over time. Your credit report will heal faster than you think.

This is an important distinction between settlement and bankruptcy. Bankruptcy can stain your credit report for ten years. Financial trouble, followed by a period of stable payments and responsible use of credit, will rarely cause trouble for more than a few years. Creditors are far more interested in what you have been doing recently than they are in punishing you for past troubles, especially those that have been resolved. In addition, these negative marks must be removed from your credit report after seven years, meaning that all evidence of trouble is erased.

Debt settlement can and does produce a permanent reduction in the amount of money you owe a creditor. Once the bill is settled, the remainder of the debt is wiped out, and you can begin to create your new financial future.

Your creditors will not come back to you at a later date to seek repayment of the forgiven debts. You will be expected to pay taxes on the forgiven amount, however. For tax purposes, forgiven debt is considered taxable income. Keep this in mind when you negotiate your debt settlements. If possible, work to spread your settlements out over multiple tax years. This is especially important if you are seeking a substantial forgiveness. If you are not able to spread your settlements across more than one tax year, work with the IRS to create a tax payment plan you can afford.

Debt Relief v. Bankruptcy

An overabundance of debts may be leading you to think about declaring personal bankruptcy. While that is one option, there are other ways to reduce your overall debt load and secure permanent debt relief.

Debts can be secured or unsecured. Secured debts are those that are "backed" by the value of the asset being purchased. Homes and cars are typically considered secured debts. Other similar purchases, like vacation homes, boats and recreational vehicles, would also fall into this category. If for some reason, you can no longer make the payments on these assets, you can sell the asset to repay the loan. You could also find another purchaser willing to take over the payments on the asset. Finally, you could return the asset to the creditor and allow the creditor to liquidate it to settle the debt.

Other debts, like credit card bills, utility bills (in most cases), medical bills, and personal loans are considered unsecured. The borrower has offered no collateral to back up his promise of repayment. Instead, the creditor has accepted the borrower's promise to repay in exchange for the loan. Unsecured debts typically have higher interest rates and shorter repayment terms than secured loans. They are also "unprotected" in bankruptcy proceedings, and are often discharged as a complete or near-complete loss by the creditor.

Student loans represent a special kind of debt. While the debt itself is unsecured, there are stiff penalties for failing to repay student loans. Bankruptcy proceedings do not discharge these loans. The law does provide a mechanism to discharge student loans, but the process is long and difficult, and the success rate is extremely low.

If you have less than $10,000 in unsecured debts, your best bet is to work out a payment plan that will discharge your debts in the space of about 3 years. Enroll in credit counseling and take advantage of debt reduction workshops and budgeting courses to help put your debt back into proportion with your income.

If you have more than $10,000 in unsecured debts, you may benefit from a combination of credit counseling and financial education programs, and some type of negotiated debt settlement. Much of your final strategy will depend upon your overall debt load, the stability of your income, and your plans for the next 3-5 years.

If your unsecured debts exceed $25,000, debt settlement should be a cornerstone of your approach to reducing your obligations. You may not be able to discharge all of your debts, but in working with your creditors, you may significantly reduce the balance you owe.

Filing for bankruptcy should be a last option. This strategy should be reserved for individuals who have no viable income, no prospects for meaningful income in the future, and who have significant unsecured debts that cannot be negotiated, settled or discharged in any other way.

Will Homeowner Plan Be Enough?

As President Obama has taken the wraps off of his plan to stave off foreclosures, some analysts are wondering if the latest proposal will be enough. The new federal funding is expected to help 7 million to 9 million homeowners in the next few years, but experts are predicting that there may be as many as 10 million foreclosures in the same time period. That number doesn't include the number of homeowners who are not in foreclosure, but who would benefit from mortgage assistance.

Another concern is the number of adjustable rate mortgages that are set to adjust in the next two years. More than $1 trillion of adjustable rate mortgage debt is on the line and analysts believe that many of these mortgages will end up in foreclosure as property values continue to decline.

While mortgage lenders have been somewhat receptive to provisions that make mortgage loan modifications easier, they're almost universally against the "cramdown" proposal, which would allow bankruptcy judges to modify mortgage agreements. The current cramdown proposals include giving bankruptcy judges the power to write off portions of the principal on a property included in bankruptcy petitions, or convert mortgage debt to unsecured debt when the value of the property drops below the value of the property's mortgage(s).

Right now, bankruptcy judges have the ability to write down or write off unsecured debts, but lenders fear that mortgage cramdowns will lead to an increase in the amount of consumer debt that is written off in bankruptcy proceedings. Details of how the cramdown proposal would work have not yet been worked out, but modifying the power of the bankruptcy court would require Congressional approval.

Loan Modification Programs For Homeowners Who Are Still Making Payments

Sub-prime mortgages, interest-only mortgages and adjustable-rate mortgages have all been implicated in the current mortgage meltdown. There is a class of homeowner, however, that is still making payments on a mortgage and hasn't yet fallen behind on the payments, but may still be looking for a way to lower monthly payments.

Homeowners looking for a way to hang onto a home whose payments are too high have focused on loan modification, but homeowners who aren't in trouble on paper are also looking for loan modifications to reduce monthly payments or avoid problems that may be looming.

In many cases, the problem isn't the monthly payment at all. Instead, property values have dropped thanks to local foreclosures, a sagging real estate market and the soaring number of properties available for sale. Homeowners may find themselves making payment on homes whose values have sunk by 20 or 30 percent. In some markets, the decline in property value has been even more severe.

Homeowners can't seen making payments on a property in which they have little or no equity, or have little chance of recovering the property's value in the foreseeable future. In a normal market, a homeowner could refinance to get a better interest rate, or lower monthly payment. With the decline in value, refinances for many homeowners are all but impossible, leaving the homeowner to pay more than the property is worth, or to turn the property back over to the bank.

The Homeowner Affordability and Stability Plan (HASP), introduced last week, may offer some new hope for homeowners who are in a similar situation. Sheila Bair, Chairman of the FDIC said last week that voluntary loan modification options hadn't worked, in part, because mortgage lenders are reluctant to risk being sued by investors who bought securitized mortgages as an investment.

HASP reduces mortgage payments to 38 percent of a homeowner's monthly income, and is available for homeowners whose loans are guaranteed by Fannie Mae or Freddie Mac. Bair counsels homeowners who have previously been turned down on a refinance to check with their mortgage lender again. Final details of the HASP plan will be released to the public on March 4. Until that time, many of the nation's largest mortgage lenders have agreed to a moratorium on foreclosures.

Some Consumers Look To Their 401(k) Funds For Debt Relief

At one time, consumers would have turned to the equity in their homes to help them out of a financial pinch. Today, that route has been closed for many borrowers who are no longer eligible for home equity lines of credit (HELOC), or whose existing HELOCs have been cut or withdrawn altogether. Fewer consumers – even those with good credit – are eligible for personal loans, and many consumers don't have sufficient savings to cover them in the event of an emergency.

These circumstances combine to make a 401(k) loan attractive to some consumers. On one hand, some financial advisors will say that when you borrow from your 401(k) plan, you're borrowing from yourself. The tactic is safe, they say, because you are repaying the loan with interest, so your retirement funds are still working even though you're putting them to use elsewhere. This explanation simplifies the rationale for borrowing from your retirement fund, but it doesn't do a good job of explaining the risks associated with such a loan. And the risks are plenty.

There are a few rules about borrowing from your 401(k) plan, but each plan may have additional borrowing rules. Typically, a loan from your 401(k) plan will be limited to 50% of your vested balance up to $50,000, depending upon your plan. Your plan will likely offer a low interest rate. Here's the catch: you could get a better interest rate and more stable loan terms by borrowing from a traditional lender, and your retirement funds have the potential of doing better in investments than with the low interest rate you'll pay on your loan.

Withdrawals from your 401(k) plan should be considered very carefully. Your ability to borrow from your employer-sponsored 401(k) plan is based on your employment. If you are fired or laid off from your job, you must repay any outstanding loans within 90 days of the date of separation. If you don't repay the loan, the loan will automatically convert to an ineligible withdrawal, and you'll be assessed income taxes on the amount of the loan plus a 10% penalty.

The risk here cannot be understated. If you're borrowing from your retirement funds, chances are good that you don't have the cash on hand to repay the loan. If you need to repay the loan in a hurry – as in the case of a job loss – you'll have a difficult time convincing a lender to refinance your retirement loan if you don't have a job. Further, your tax bill may become catastrophic (at a time when you really need your cash) if your 401(k) loan converts to an ineligible withdrawal, complete with taxes and penalties.

Some creditors may mislead you or may pressure you to withdraw retirement funds to pay your bills. Generally, retirement funds are protected in bankruptcy proceedings, so you should not consider them a ready source of cash to tap in a financial emergency. If your credit card debts or other obligations are causing you to consider a loan from your 401(k) funds, look for other options, including debt settlement to relieve the financial stress you may be experiencing.

What Do You Need For Loan Modification?

Loan modifications can and do work, but their success depends upon the terms of the modification and how well the new agreement addresses the borrower's problems. For some borrowers, modifications end up costing more money out-of-pocket or over the long run than the original mortgage did. Rather than helping a borrower, these modifications often make the borrower's situation worse and, in some cases, guarantee that the borrower will lose the home.

Before seeking a loan modification, a borrower should understand why the current loan terms aren't working. The monthly payment could be too high for the borrower's current income level. In this case, the borrower should be seeking modifications that lower the monthly payment. Modifications that will lower the borrower's monthly payment include those that lengthen the term of the mortgage, reduce the interest rate on the remaining balance or reduce the balance due. Some modifications will combine these elements. If the end result of a loan modification isn't a lower monthly payment, the loan modification should be refused.

In other cases, the problem is that the value of the property has declined, and the borrower owes significantly more on the property than its current market value. In this case, the goal of the modification is to "right" the loan. The best way to bring the loan in line with the real value of the property is for the lender to forgive some of the remaining balance due.

This approach may not be the lender's first choice, but forgiving some portion of the principal owed is usually less expensive than a foreclosure and resale. An added incentive for borrowers to accept this kind of modification comes in the form of a tax break. Usually, forgiven debt is considered income for tax purposes. In 2009, forgiven mortgage debt (only) is exempt from income tax.

Still other borrowers are seeking to modify the terms of their loans to prevent adjustable rate mortgages from rising, to avoid a balloon payment, or to catch up on missed payments. Normal refinancing options may be unavailable due to new lending eligibility guidelines or a borrower's reduced equity. For these borrowers, simple loan modifications can address each of these issues, provided that the borrower can work his or her way through the lender's modification process.

If you would like to explore loan modification, but your lender is not responding, you're not alone. Many lenders have been inundated with loan modification requests. Consider working with a third party to negotiate a loan modification on your behalf. Working with a reputable loan modification firm that represents your interest and understands the process of loan modification can get you the terms you need when you need it.

Short Sale Tax Break To End In 2010

For homeowners who are facing possible foreclosure, one option includes a short sale with loan forgiveness. Homeowners use this approach when they want to avoid foreclosure, but can’t sell the home the mortgage exceeds the home’s current value. The mortgagor agrees to accept the sale price of the home as full payment for the mortgage and forgives the remaining balance.

Under ordinary circumstances, the Internal Revenue Service would consider the amount of the loan forgiveness taxable income. Under the Mortgage Forgiveness Debt Relief Act, signed in December 2007, the loan forgiveness can be tax-free if the homeowner meets certain criteria.

To qualify for the federal tax-free benefit, the home being sold must be the seller’s primary residence, the debt forgiven must be mortgage debt (as opposed to home equity financing) and the sale of the home must have taken place between January 1, 2007 and December 31, 2009.

On January 1, 2010, without further action by the Congress, the tax-free benefits that are currently extended to homeowners who conduct short sales will expire. The law was originally intended to provide relief to homeowners who are facing bankruptcy and foreclosure. There has been no discussion early in this legislative session with regard to re-authorizing the relief. Depending upon the status of the economic recovery, Congress could quickly reauthorize the relief later in the legislative session.

For 2009, however, short sales that include loan forgiveness will continue to be a viable option for homeowners who are seeking to avoid bankruptcy.

Spending Plan The First Step In Debt Relief

The number of consumers looking for debt relief exploded in 2008. Search statistics from Google and other poplar search engines show a significant increase in the number of searches related to debt, foreclosure, credit card debts and loan modification. While the state of their personal finances is in the forefront of consumers’ minds, consumers can take positive steps toward managing their finances.

Whether you work with a firm that specializes in debt relief, or employ your own plan, one of the first steps you should consider is the creation of a spending plan. Spending plans can be simple or complex, but a spending plan can help you reduce your debts, spot areas in which you can reduce your spending or increase your savings, and identify short-, mid-, and long-term spending priorities. Three particular expenses will find a place in most spending plans.

In general, your housing shouldn’t consume more than one-third of your available monthly cash. Once you exceed this amount, you’re committing cash that should actually be set aside for emergencies, and impairing your ability to deal with the unexpected. If you spend more than one-third of your income on housing, consider refinancing if you’re a homeowner, or reduce your expenses in other areas to recapture the extra cash you’re laying out on housing.

Transportation may be another area where you’re spending too much of your monthly income. Car payments can often reach into the $400-$500 range. Add to that the cost of gasoline, insurance and maintenance, and you’ve got a significant expense. If you have a spouse who also has a vehicle, your transportation costs may even exceed your expenditure on housing. Here’s one area in which you can save. You can reduce your spending by eliminating one vehicle when possible. Take the cost of commuting into consideration when you decide where to live. Trade in a less fuel-efficient vehicle for a more efficient one and take advantage of tax breaks on hybrid vehicles. Regular maintenance can help you avoid expensive repairs. Speaking of which, don’t forget to take the cost of maintenance into consideration when choosing a car.

Your spending plan should commit between 10 and 20 percent of your income to debt repayment. Debt can come in many forms, but your priority should be to accelerate the payments on debts that have the highest interest rates first. Mortgage interest and student loan debt come with tax breaks that you shouldn’t ignore. Credit card debt doesn’t come with such breaks so it’s to your benefit to get rid of it as soon as possible. The type of debt you’re carrying should determine how much of your income you devote to debt repayment.

Overall, a spending plan will help you understand discrepancies between your stated spending priorities and your actual spending. Once you’re aware of the areas in which you’re likely to divert from the spending plan, you can take steps to avoid making significant spending errors.

Paying Off Your Debts

If 2008 has you thinking about your spending and saving habits, you’re not alone. Consumer spending fell nearly eight percent in November as consumers reeled from the impact of job losses, foreclosures, and growing personal debt. With so many challenges, some consumers are unsure of where to start when it comes to resolving their debt problems.

If you’re still able to make payments on your debts, your priorities should include paying off your most expensive debts first. The expense of a debt should be measured by the obligation’s interest rate. Those debts whose interest rates are highest should be addressed first. If you have extra cash, put it against these high-dollar debts.

This strategy works even if the overall amount of high-interest rate debt is small, relative to the other debts you owe. Accelerating payments on tax-deductible debts like mortgages and student loans should be a low priority. First, these debts are likely to have a low, fixed interest rate. Second, their tax deductibility gives them an advantage that your credit card and personal loan debts don’t have. The deductibility of these debts reduces their cost further. Since these low-interest debts cost much less than credit card debts do and also provide you with a tax advantage at the same time, it makes little sense to accelerate these payments if you have other higher-interest, non-deductible debts that could use the extra attention.

Watch your credit card interest rates carefully. If the interest rate on an account suddenly jumps several percentage points, review your payoff priorities and make adjustments accordingly. Always work on eliminating the highest rate debts first to reduce the overall cost of your debts. Once you retire a debt, put the card away and focus on the next highest-interest rate debt. By focusing your debt reduction efforts, you’ll find that your debts will disappear sooner than you think.

Managing Debt Overload Job #1 In 2009

In the past two years, a series of events has brought the issue of consumer debt to the forefront. In 2007, sub-prime mortgages crashed onto the scene as the number of foreclosures began to rise. In late 2007 and early 2008, the secondary securities markets, where mortgages and other loans were bundled and sold, fell apart, putting a chokehold on new credit. Borrowing virtually ceased, and at one point, banks would not lend cash to each other, even overnight.

In July, major financial institutions began to give indications that the "liquidity crisis" was negatively impacting their ability to do business. Among hastily arranged mergers and takeovers, a few large banks collapsed into FDIC receivership. By the end of the year, the federal government was offering hundreds of billions in bailout dollars to banks, insurance companies and investment firms, while at the same time, raking auto industry executives over the coals for what seemed like a paltry $20 billion.

Meanwhile, ordinary consumers, who ultimately pay the bills for all of this, are awash in mounting credit card debts, home mortgages gone awry, jaw-dropping medical bills, and declining investment values in residential real estate, money-market funds, stocks and just about everything else.

For some consumers whose unsecured debts exceed $10,000, there are only a few options available. For those who want to avoid bankruptcy, debt settlement and loan modifications rank among the most promising tools. While debt settlement is getting a bad name compliments of a few bad actors in the field, many legitimate debt settlement companies exist and are helping consumers make the best of a bad situation without turning to the bankruptcy courts for assistance. Expect regulatory changes for debt settlement companies in 2009 or 2010, but for legitimate organizations, these regulations will strengthen and improve the industry. Congress should focus on those changes to the financial industry that will assist and protect consumers since they are ultimately the ones who will foot the bill for the corporate bailouts that Washington is currently underwriting.

Happy New Year? Maybe Not!

Major credit card issuers in the US are wondering if the losses they began to see in 2008 are just the tip of the iceberg. Charge-offs, those debts that the lenders have deemed "uncollectible" and debt settlements, those debts that lenders accept a reduced payoff for, are rising at a much faster rate than they have in the past few years. Discover Card Services is predicting that its charge-offs will nearly double in 2009.

Credit card issuers are taking a three-fold approach to the mushrooming credit card crisis. First, they're tightening lending restrictions. Fewer new cards are being issued, and creditors are demanding higher credit scores before issuing new accounts. This is not good news for consumers and small business owners who rely on credit cards to get through the month. Not all consumers are behind on their bills, and the move back to cash can be jolting even for those consumers who pay their bills on time. Small businesses that can't get new credit can't expand, and in some cases, can't even operate.

Second, card issuers are slashing credit limits and raising interest rates. Some consumers are seeing major cuts in the amount of their available credit. This has a dual effect. First, it changes the ratio between available credit and used credit, putting an otherwise good credit risk in a potentially negative credit situation. Second, the interest rates on existing purchases is going up, meaning that even consumers who are not using their available credit have even more debt to repay.

Third, card issuers are turning to the federal government in the hopes of being reclassified as "bank holding companies" in order to gain access to the recently authorized Troubled Asset Relief Program (TARP) funds. By asking the government to backstop the growing percentage of bad debt, the credit card issuers are hoping for some breathing room, compliments of Uncle Sam.

The upshot for the consumer in trouble is that credit card companies expect further losses in their consumer debt holdings. Debt settlement, a technique that more consumers are turning to, is expected to take center stage in 2009 as consumers look for alternatives to both bankruptcy and crushing debt loads. While creditors are warning consumers away from debt settlement, it continues to emerge as a potentially successful way for consumers to emerge from overwhelming debt without declaring personal bankruptcy.