Unsecured Debt - How Obama Has Made it Easier to Eliminate Unsecured Debt

The economic crisis occurred because lenders had given loans to those who did not deserve to be given money. The money was lent primarily to facilitate real estate investments. In theory, the debts were secure because the property purchased using the loan could be possessed and foreclosed to secure repayment in the event of default. However, too many borrowers defaulted and even foreclosures became impractical. That is when the economy started going belly up. Firms that had invested in securities derived from the secured loans found themselves owning worthless assets. However, the general opinion was that the problems caused by secured borrowers would amount to nothing if borrowers of unsecured debt started defaulting. The problem of unsecured debt was giving nightmares to lenders and the government alike.

Rather than providing direct relief to individual borrowers of unsecured debt, the government decided to focus on the lenders. It was hoped that if the worry of the lenders were to be assuaged, they would in turn pass on the benefits of the stimulus program to the borrowers. Although cynics claimed that the lenders would keep all the benefits to themselves, the truth is that a significant portion of the relief has trickled down to those who borrowed unsecured debt. Today, it has become very easy to get a debt settlement. This has become possible only because lenders received benefits from the government and were prepared to pass it on to the borrowers of unsecured debt.

Although the condition of the economy has improved, there is no denying that many borrowers of unsecured debt stand on the brink of disaster. The smallest push is enough to send them over the edge. Hence, although fear of collapse of big firms is no longer present, the fear that borrowers of unsecured loans could simply file for bankruptcy has still not gone away. Hence, lenders are being careful when dealing with unsecured loan takers. They are doing their best to settle the debts. They are ready to give up a share of their profits and are even ready to bear loss as long as they get a portion of the money lent as repayments.

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