The economic climate has just turned for the better from times when the common citizen was struggling under the worst recession ever to hit the market. Unemployment, lay offs, salary cuts etc. were the norm. In these difficult times many people had to resort to credit and loans in order to run even their daily expenses. This is when many common debtors found that their unsecured debts were spiraling out of hand. Many debtors had accumulated huge credit card debts along with other loans and utility bills and did not have the income necessary to repay them. Many debtors resolved to bankruptcy in desperation. The financial institutions like credit card companies and banks were the worst hit due to these bankruptcies.
The federal government realized that if a large number of debtors filed for bankruptcy, the financial institutions like credit card companies would lose all their money because these loans are unsecured loans and have no collateral attached to them. This is the reason the federal government floated stimulus money in the market to save the financial institutions from immediate ruin. The financial institutions like credit card companies in turn abandoned aggressive collection tactics. Instead they started offering relief to the debtors in the form of debt settlement programs.
Under the debt settlement programs the debtors could negotiate the loan amount with the creditors. The creditors then assessed the debtor's income vs. expense graph and calculated their actual paying ability. Based on this they decided upon a settlement amount which could have paid as a lump sum or in monthly installments. This relief in the form of debt settlement saved many debtors from bankruptcy and they could become debt free within a reasonable amount of time. Not only this, the debt settlement procedure is completely legal. This is due to the creditors agree to ignore the agreement previously made with the debtor and enter into a new one at the time of settlement. Once the debtor pays the settlement amount in full, he / she is given a letter of full and final settlement which states that the debtor does not owe the creditor any more money.