Millions of Americans are feeling the stings and arrows of the declining economy. In 2008, over 250,000 homes were foreclosed each month – which translates into three million homes foreclosed in the entire year. More credit card debt is racked up each month, and millions of Americans are looking to consumer credit counseling services for debt management help. Now that newly elected President Obama has signed his stimulus bill into law, what does that mean for the average American with debt management issues?

Who the Plan Will Not Help

First and foremost, Americans must realize that the stimulus plan is not “free money.” People who have uncontrollable debt management issues will not suddenly see their debt wiped away. With that said, the plan does provide debt help to those in serious trouble with their mortgages and credit card debt.

Remember that the bill is a financial plan to help stimulate the American economy, not pay off personal debt. However, by helping Americans manage and control debt, more expendable income can be spent on goods and services – which is exactly how the plan hopes to revive the economy.

How the Plan Can Relieve Mortgage Debt

Millions of American homeowners are feeling the financial crunch of extreme adjustable rate mortgage (ARM) interest hikes or job loss, and they find themselves unable to make their regular mortgage payment. With an average of 250,000 homes foreclosed per month, what are homeowners to do?

The mortgage bailout portion of the stimulus package tags $75 billion for the setup and aid of getting mortgage borrowers back on their feet to avoid foreclosure. Though the federal funds will not give you free money to pay off your back payments or reduce your principal balance, the money will be used to set up a government intermediary program that puts qualified borrowers and lenders together to discuss real solutions to mortgage problems.

A homeowner who is suffering a financial crisis and is having trouble meeting mortgage obligations can use the program to help set up and negotiate a loan modification. However, if you are not delinquent on your mortgage and have the financial ability to pay your mortgage, this plan will not help you. In addition, should you have an inability to provide evidence of future employment, mortgage companies are unlikely to help you through this plan either.

A loan modification is a change in the original mortgage terms, such as a lower interest rate or extension of payments that reduces the monthly payment amount. Working with the lender in this fashion could result in the forgiveness of much of the principal balance, limited forbearance, and ultimately, help homeowners keep their homes and avoid the expense and trouble of foreclosure.

The Benefit of Tax Rebates

President Obama has also passed tax rebates for most Americans. Taxpayers will receive a portion of their 2008 paid taxes back to them in cash. Some of that money may be needed to pay back taxes owed or can be spent directly on reducing piling credit card debt.

Americans who are careless about their debt management and spend more than their means will not see much help. It is people who are responsible and are making real efforts to pay off debt who will benefit from the stimulus bill.