The recent economic slump has seen many people get unemployed and some financial giants at the point of closure.
Due to this a lot of people have filed for bankruptcy.
In order to help out the country's economy, government has given out millions of dollars to the large financial institutions so that they can cover their losses and remain in business.
Since most of the credit card companies are funded by some of these financial institutions, this benefit also reaches the end consumer in the form of debt settlement.
Now the creditors are in a position to settle those accounts where they feel the debtor will be unable to repay his debts.
Debtors with huge amount of unsecured debts can benefit from this program as any debtor with ten thousand or more in unsecured debt can be a part of it.
The reason why most creditors extend this offer only to huge debt account is that they feel the consumer does not risk a bad credit for a small debt amount.
The amount of settlement depends on various factors like the creditor with whom you are dealing, the amount of debt you have with them, risk of bankruptcy etc.
However, ideally a good settlement amount can get you a debt reduction of about 40 % to 60 % of the total debt.
In this process of debt relief, the debtor offers to pay a certain amount of the total debt which the creditor accepts as full payment.
There are various reasons why a creditor would settle the account for less than what is due.
One of the biggest reasons is, if the creditor thinks that the debtor will be filing for bankruptcy in the near future.
Another reason is if the account is to be sold to collection agencies and the creditors feel that they will be able to get more money through settlement.