Sorry, but any more plans involving extending "helping hands" to those who lived beyond their means while those of us who have scrimped, saved and done without are left by the wayside picking up the checks is just another slap in the face.

It needs to be all or nothing. Don't just let people who can't pay back their credit cards off the hook, let all of us off the hook. And since not everyone has credit card debt, you can't do that either.

I would say to give taxpayers one fat check each to pay off debt or whatever, but dumbasses would just buy more stuff instead of paying off debt.

@mightydarv: The problem is that the bailouts might seem unfair, but they're better than us scrimpers and savers losing our job because nobody can afford to pay us/buy from us anymore.

Why not a tax deduction for debt reduction? Say that any existing debt that is retired in a given time period is deductible, and the amount that is deductible is reduced by any new debt taken on by a consumer during the same period (so you can't pay off one credit card by moving the balance to another and claim a deduction, or worse, pay off $10,000 in debt and incur $20,000 in a new car loan and still get a deduction).

Sure, it'd be painful in the short run, but in the long run it might change behavior. Especially if the next act is a removal of all deductions for interest (on homes and student loans).

If they wiped 40% of credit card debt across the board, I would be OK with that. However, along the lines mightydarv and 12-Inch Idongivafuck Sandwich have already stated, helping only those who have been knowingly living beyond their means without helping the rest of us is not acceptable.

@tedyc03: While its an interesting proposal, it has some major flaws.

First, how long would we have to hold the debt to get the deduction for paying it off? Because if it is simply measuring the debt at the beginning of the year versus the end, what's to keep me from "charging" 10k worth of goods that I could have paid cash for, then paying it off Jan 2? On Jan 1 I had 10k of debt and at the end of the year, I'd have 0 - easy 10k deduction. Now imagine that at a grand level.

Sure, it could only be done every two years (you'd need one year to reset), but it'd open up a whole new level of tax planning...

I don't understand - Businesses need to be bailed out, so we forgive their debt by giving them free, tax-payer money.

Citizens who can't pay their mortgage get refinanced with lower-than-mine interest rates, and extensions on their foreclosures.

But people who can't pay their credit card don't get a free ride?

Let's see some consistency damnit! Free ride for all!

It would be life changing if my student loans could be made to go Bye Bye , or even if they were reduced... I have a job and pay every month (and will for the next few decades) and the ability for me to save for a house or anything really while I am still in student debt is very difficult. Not complaining just think that the type of debt should be considered.

Okay Mr Government, I have about $40k in student loans, I mean I've been paying them off, but ya know, I've just decided you guys should pay that for me instead. After all you are giving money to all these people who have indicated they wouldn't know how to spend it if Warren Buffet kicked them in the head, why can't I have some too?

@12-Inch Idongivafuck Sandwich: Agreed - do it for all or no one. And do things that promote long term growth. I think we've all seen how ineffective the snake-oil bailouts have been at fixing the problem. How many trillions have been spent? what effect has it had? It's like they're trying to use duct tape to fix the axle on a speeding tractor-trailer - except the duct-tape doesn't exist.

Slash all taxes for everyone (even rich people), cut government spending to bare minimums, and let it crash so the healing can begin.

.

"The sticking point was a clause that would let banks defer paying income tax on the forgiven debt until the rest of the debt was paid off."

That means that the banks would not pay income tax for a verrrrrrrrrrrry long time. I knew that had some other motive than feeling sorry for me.

@Xerloq: Considering that the government employs the most people directly, not even taking to account positions that are paid through government grants - how well do you think the economy will absorb the jump in unemployment and the increased demand for services - like roads, police, and health care?

While it might feel darned nice for spendthrifts and irresponsibles to get carted to the labor farms to work off their debt, banks' poorly regulated, wanton borrowing has created a suck-hole so large that the global economy is circling the drain.
This mess is bigger than my smug sense of entitled schadenfreude.
Damn unregulated markets - to Hell! - for taking this away from me. Bast*rds.

I must be missing something here. If the bank writes of the debt, because it is fogiven, then no income would be earned. If no income is earned on a forgiven debt, what takes would be owed?

@tedyc03:

I have a similar idea to fix this mess:

1. First, eliminate the $102,000 earnings cap on social security and lower the rate to 4%.
2. Give EVERYONE $50,000 debt eliminations/tax credit. You can take a combination of debt elimination, tax credit or a little of both. Tax credit carries over for five years.
3. Use bailout money to stabilize lenders who have to write off the $50k debt.

This proposal helps EVERYONE immidiately.

Examples:
Joe makes $40k and has a mortgage out for $300k. Whoops! He can write that debt down to $250k, refinance and the bank can obtain some $$$ from the bailout package as incentive for cooperation.

Tom makes $100k and lives in an apartment. He can use that $50k tax credit to offset taxes every year. He will wind up paying a little less in SS taxes as well with a 4% rate vs 6.2% rate, despite the cap being raised.

Mike makes $270k and owes $40k in credit cards and student loans and mortgage debt. He can write off the $40k, each lender gets their share of bailout pie. He can use the remaining $10k tax credit on his 2009 1040.

win-win-win

@12-Inch Idongivafuck Sandwich:
Actually surveys show that the last stimulus check was mostly used to pay debt (Not stimulate the economy, which was the intention). Surveys asking about a new stimulus check show that many people would do the same thing this time around.

@tedyc03: The easiest thing to do to change behavior is to let people keep more of their own money and do what they want with it.

Here are a couple of interesting quotes from Thomas Jefferson

The democracy will cease to exist when you take away from those who are willing to work and give to those who would not.

I think we have more machinery of government than is necessary, too many parasites living on the labor of the industrious.

@12-Inch Idongivafuck Sandwich: Ya know, that just might fix the economy. Or delay the inevitable. Either way, I like it!

@Blueskylaw:

This frustrates me immensely.

On the one hand, I have sympathy for people who were sucked in by deceptive credit card practices. Honestly, you have to be pretty well educated to stay ahead of some of the sleazy CC companies, and it's pretty easy to be taken in. For example, it's a fair assumption, all other things being equal, that paying the minimum balance on your credit card will get you somewhere. That's what you do with a mortgage or car loan, and I can see how people think that it would extend to other types of credit.

I have a feeling that the 40% number came from a calculation of the average amount of debt due to accumulated interest. Credit card interest rates are ridiculously high. I also suspect that credit card companies are worried that customers are going to default and they'll lose out an all of their money, and this is an effort to regain at least some.

On the other hand, I hate all this bailout crap. When are we going hold people (and companies, for that matter) responsible for their own mistakes? You bought a house you can't afford, not my problem. You built cars that people don't want, not my problem. You lived beyond your means, not my problem.

As others have said, I have finally (for the last 6 months) been able to get myself out from under CC debt accumulated when I didn't know better. I scrimp, I choose between luxuries, I clip coupons, etc. This is how we get into credit crises in the first place -- by teaching people that their mistakes will be taken care of anyway, and that it's not worth the trouble to pinch pennies.

@Trai_Dep: *[raspberry]*

Once again our society caters to the idiots and lazy bums while the responsible people are left holding the tab. Wish I had free healthcare, got huge tax rebates when I pay no taxes, had my bad mortgage handled by the government and had my credit card debt wiped out after buying the biggest LCD TV money can buy.

Step one to help all this along:

Enact a new Tax CREDIT for annual student loan payments.

The best way is to lock the debt, for example a person with 10K in credicard debt is going to take forever to pay it off if you pay the minimum. Why not locking the time of your debt say 5 years at a fixed interest. that's better than forgiving any debts or bailing credit card companies

Here's an idea. Why not tax the crap out of credit card debt and take that out of there pay check. So that way when they default on there credit cards, we have a surplus of money to pay for it. Not to mention this would reward any behavior to NOT run up your credit card bill.

Speaking as someone who sacrificed quite a bit (including relocating for a better-paying job) to pay off her credit card debt, I can't say I feel too sorry about this one. I know how debilitating the debt can be, and I do feel for the people stuck with it. I just don't think mass handouts are the way to go -- whether those handouts go to individuals, banks, or auto manufacturers.

@Blueskylaw:

It's a reasonably good compromise - banks will absorb the losses on credit in exchange for some tax relief. But our government is so addicted to spending that it's unwilling to surrender revenue to help taxpayers, largely because of cascading bailouts and wanton spending on defense, entitlements, etc. Besides, there's no free lunch - they'd essentially be robbing their debt relief from our currency valuation due to our budget shortfalls. Which, you guessed it, hurts everyone with actual cash.

I'm tired of this crap too. Bad companies should be allowed to fail. People who spend way above their means need to learn a lesson the hard way. I have sympathy for someone who had an accident or something and is stuck with high bills. But people who got in too deep trying to keep up with the Joneses are reaping what they sow. A few years ago I finally got myself out of 8k in credit card debit. I busted my ass to do it too.

If they are going to give free handouts by wiping out peoples CC debt, then I want a check for the average amount people's debt are being cleared.

@tedyc03: This is part of the reason why the government is not allowing the companies to do exactly that.

@mmmsoap: On the other hand, I hate all this bailout crap. When are we going hold people (and companies, for that matter) responsible for their own mistakes? You bought a house you can't afford, not my problem. You built cars that people don't want, not my problem. You lived beyond your means, not my problem.

I completely agree with your statement here.

If you willingly took on debt you couldn't afford I think you need to learn how to live with those circumstances. It shouldn't be my responsibility as a tax payer to help you out with that when I, as a tight ass, have lived within my means, scrimped and saved, and lived a modest life. It sends those in severe debt the wrong message that they will eventually have their debt forgiven.

To quote Airplane "... they bought their tickets, they knew what they were getting into. I say, let 'em crash."

So, if this plan came to be, what would I have to do to negate my qualifications for existing repayment plans (due to youthful folly as well as loss of job, I accrued significant CC debt. I went ahead and did the responsible thing and made an arrangement w/a nonprofit.) Would I have to quit my current job and then quit making my payments to the non profit? Seem like even if this went through it would encourage more irresponsible behavior from those in situations like mine.

How to avoid credit card debt? Don't use credit cards. Cash only. Can't afford stuff you want. Save. Get a 2nd job (darn, you might not be able to waste time watching your favorite mindless TV shows that don't pay you to watch). Find a new job. Get training for a new job or skill. Jeez, do I have to all the thinking here? Anything else is an excuse to spend what you don't have. Boom. Done.

@Hamtronix: Yeah Hamtronix - it would be life changing if someone would forgive the next 26 years of my mortgage too. I have a job and I pay every month, and will for the next 26 years. The ability for me to save for my retirement or my kids education is difficult.

I'm not complaining, I'm just say that my type of debt should be considered.

(/end opposing viewpoint in sarcastic format)

How about them credit card companies take their interest rates down to 1-5% instead of pushing them over 20%? Maybe they'll see less folks defaulting on them...

@floraposte: Agreed.

mightydarv may see it as a slap in the face. But the truth is, people couldn't afford their minimum payments, so what did CC companies do? Raised their rates and charged them huge fees ($30 dollar late fee, $30 dollar over the limit fee) That adds up fast! You're now paying over $75 more a month to meet that minimum payment.

So what happens then? People just stop paying it because they have to choose between paying on their CC (when their credit score is already shot to hell) or feeding their family or paying the electricity/water (which has gone up in many markets).

What happens when people default? The consumer loses money, the lender loses money, the government loses money. Everyone loses, then the company starts laying off people because it's not making it's margins. Then people are out of full time work, can't buy as much at the store, can't pay their bills, then the process starts over again, the stores lose money causing layoffs the bill collectors lose money causing layoffs.

It's a horribly vicious cycle. If we are all greedy and think that helping hands are WRONG then we're going to be in a hell of a position. People living within their means AND people not living within their means will all be in trouble...

I can asure you , there are several people in this country who "Live within their means" who have lost their jobs due do companies or consuumers not having that "helping hand".

I think the problem with this type of problem, as many people have pointed out, is it's not fair to the population. Since some people don't have credit cards/credit card debt (whether by personal choice or by inability to attain credit), the bailout is only helping a portion of the population.

I see two potential options (not saying they are great, just options) -

1) Another "tax refund" to stimulate the economy. Those that have credit card debt can elect to pay it (or catch up on the mortgage), while those that don't can save it or stimulate the economy by buying more crap. I'm not sure though, if our govt really needs to be kicking out a few more billion in cash right now.

2) If credit card companies are really concerned about losing on principle and interest (as someone else suggested in the comments), why don't you offer a compromise to the lender and borrower and cancel the revolving line of credit and covert it to a loan. The term of the loan could be set by parameters (amt of debt, borrowers ability to re-pay, etc); the interest rate should be variable (prime + x% with a cap on the max rate)....you could make the x% lower for those that accept shorter repayment terms. Once the loan is paid off, the borrower is in the clear, the lender has been repaid in full (with a discounted amt of interest), and the line of credit is closed.

Like i said, not sure either is ideal, but I personally would lean towards #2....it puts responsibility on borrowers to pay their debt, allows lenders to recoup their money (even at a discount, it's better than nothing), and it keeps the govt out of another expensive bailout.

Thoughts?

Can't log in for some reason.

Anyway, I'm one of those people that didn't have credit, that went without and paid what I could afford. And I'd like to indulge in feeling the same way most of you do: that those who had all the extras I couldn't afford while I went without should suffer. By all rules of fairness, they probably should.

But you're all missing the bigger picture. Those people were/are consumers, and they have a lot less or nothing to spend now. It will affect you.

Work at a restaurant? People who used to be able to eat at your place but now can't due to overwhelming debt (of their own making) won't be eating out anymore. Eventually, your employer will have to either go out of business, or at least cut staff. You're out of a job.

Work at a manufacturer? Same thing. People can't afford to buy your goods. Service provider? Same thing.

There are very few industries that will be immune to this. It's a short-sighted, naive view to say "doesn't affect me--let 'em burn".

LaraAtHom

@nicemarmot617: Totally seconded.

Mr. Government, just think of how much money I'd have used to stimulate the economy without the albatross of student loans around my neck!

Why, if I hadn't been paying back my student loans maybe I could have A) been able to buy a house and b) not defaulted on my mortgage! Imagine that!

@Hamtronix: Same here. I have student loans & credit card debt from college and grad school. My parents did not contribute to my educational expenses at all, even though I had to report their income on my financial aid forms.

My husband has college debt and was also jobless for a year back during the dotcom bubble burst. We're in our 30s and can't afford to do anything but pay rent & about $2000/month on debt.

Everyone who has debt is not someone who has lived beyond their means!

This is pretty unfair to those of us who didn't overspend, and were able to manage our debt properly. It's offensive to see people rewarded for irresponsible behavior, while punishing the rest of us.

I would rather they help the homeowners than the credit card holders. And by helping I mean don't forgive any debt, just renegotiate the rates and set it 30 year fixed. Also tag on a 5% prepayment penalty (soft or hard) for at least 5 years to make sure these people really want to keep their homes.

The government needs to do something to reign in the double-fisted greed at the credit card companies. They are asking for handouts from the government while simultaneously jacking interest rates into the stratosphere for people that have not defaulted. How am I supposed to pay back my debt at 28% interest?

I would propose that the government requires all CC debt be capped at 5% interest. Then people's payments might actually go to reducing debt instead of prolonging it.

Figures.

I just paid off more than $8 grand in CC debt over the last two years.

@tedyc03: Once upon a time (just before I started paying taxes), all consumer debt interest payments, not just mortgages, was tax deductible. As soon as that deduction was eliminated, the Home Equity Line of Credit was invented. And then when people default on those, they lose their houses.

Not to mention that after decades of lobbying, credit card companies got unsecured debt to be be non-dischargeable under bankruptcy. They dug their own hole.

If banks are willing to forgive 40% of credit card debt, is possibly because they already milked the debtors enough already.

@Blueskylaw:Oh my gosh, your theory sounds like it might be some of that widely renowned "information the credit card companies DON'T want you to know!" Keep it under your hat... remember they know where you live!

What's needed is a program that helps consumers pay off this debt without punishing them further with high interest rates and fees, and does not reward the CC companies for their sleazy tactics.

How about allowing consumers to voluntarily transfer existing cc debt into a government program that purchases the principal portion only and then charges a fair - say 6-8% - interest rate until paid? The catch would be that as part of the program the consumer's credit is frozen, meaning no new credit and transferred accounts must be closed (there could be an exception made for collateralized purchases - home, car). Repayment would be made via payroll reduction and any tax refunds would go towards repayment of the debt.

In addition, the interest, fees, and penalties on the books of the CC companies should be relieved (written off) with no offsetting tax reduction for the bank. We should not be rewarding the banks for unfair practices, giving people an insane amount of credit, and then putting those customers into an endless cycle of debt with high interest rates, penalties, and fees. They need to take some responsibility for this mess, if they granted credit based upon means of repaying some of this could have been avoided.

Yes, many consumers only have themselves to blame for this mess and they should not be relieved of repaying the purchases they made, however please tell me how a 30% interest rate is fair (and not usury)? Why is it ok to raise a rate on one card that's paid on time, when someone is a day late on another card? Why would someone that makes $50K have over $20K of credit available? The banks' greed caused this and they should not be rewarded.

[I apologize for rambling]

@Trai_Dep: +5 points for working in the word Schadenfreude!