Debt Settlement Vs Bankruptcy

With today’s economic difficulties, consumer debt is at an all-time high. As American’s continue to struggle with debt, record numbers of consumers—nearly 1.6 million in 2003—are filing for bankruptcy. Whether you’re financial situation is the result of an illness, unemployment, divorce, or simply overspending, it can often seem overwhelming. If debt has gotten the better of you, try debt settlement before going the bankruptcy route.

1 in 68 Americans declare bankruptcy each year. While their reasons may vary, it is a very dangerous trend. People do not realize how much damage they can do to their credit rating when they take this option to get out of debt. Bankruptcy can cost you more than the attorneys will let on. Their ads show smiling people that do not tell you that for 10 years they were unable to qualify for a loan, that their house was still foreclosed on, or that they were barred from some jobs.

Declaring bankruptcy is like pressing the ‘reset’ button for your financial life. Most of your financial assets are liquidated, and your debts and lines of credit are erased completely. While having your obligations removed sounds great, it also means that you have at least seven years of life without credit ahead of you. Declaring bankruptcy announces to the financial world that you are willing to sacrifice future credit opportunities to relieve yourself of obligations you promised to fulfill.

Why you should avoid bankruptcy: When you file for bankruptcy, you file for legal protection against the debts you owe and the people seeking to reclaim their money. The problem comes from the fact that not everyone is approved; your case may be considered abusive or have another problem. Then, there is the credit factor. Yes, you get to walk away from many of your debts, but you will have a low credit score and have trouble acquiring financing for seven long years. Seven years is a long time to not need to buy a new home, new car, or need money for a personal emergency. Are you willing to take the chance?

When you file for bankruptcy, you must go through an experienced bankruptcy attorney. The cost of filing is minimal, but the cost of a good attorney to handle your bankruptcy could be as much as $3,000 or more. The cost of a debt settlement company can be just a small portion of what you owe to your creditors.

Since we have been in this economic Tsunami of sorts, credit card debt settlement has really caught on. Maybe not like wildfire but it’s getting its fair share of media buzz from both proponents and opponents. The basics of credit card debt settlement are pretty cut and dry; if you owe $13,275.89 on your Capital One Mastercard and you haven’t made a payment in let’s say fourteen months, you are a candidate for credit card debt settlement. In that time Capital One would have charged off the account and turned it over to a debt collection company.

Debt settlement is the process where negotiations with creditors is made to lower balances or forgive them all together, reduce interest rates, lower monthly payments or some or even all of these options. Bankruptcies are designed to eliminate debt or help to repay debt under the protection of a bankruptcy court. They are often described as ‘reorganizations’ or ‘liquidations’.

Debt Settlement vs Bankruptcy – Choosing the Best Option Out Of Debt

Before you decide on things, you have to understand the reasons behind the decision making with regards to addressing your financial problems. One thing to consider is debt settlement. This can be one of the most effective ways of addressing the debts you have. It will facilitate the improvement of your financial status. It will eventually facilitate the urgent relief from harassment and stress of angry creditors. With debt settlement, you can usually settle your bills in a short period of time, usually 1-3 years.

Debt settlement is a much better option for those looking to get rid of their debt. With this option, you can keep your credit rating intact. With this option, you negotiate with your creditors or hire a company to do it for you in order to pay back a lesser amount than what you currently owe. Often the negotiation can be for twenty to eighty percent of your total debt. Debt settlement also allows you to keep your privacy intact and allows you to update your credit score a lot sooner.

Many reputable debt assistance groups are endorsed by the Better Business Bureau. Individuals can ask these companies for references, as well as, look at different case studies on other individuals they have helped. It is important to choose a group that has a proven track record. One should ask how this process will effect their credit rating and what the drawbacks might be. Individuals must be prepared for collection agent calls, law suits and damaged credit.

If you want to get out of debt and hire a debt settlement company for debt negotiation then I have an important piece of advice. Do Not go directly to a particular debt settlement company but rather first go to a debt relief network who is affiliated with several legitimate debt companies. In order to be in the debt relief network, the debt settlement companies must prove a track record of successfully negotiating and eliminating debt. They must also pass an ethical standards test. Going through a debt relief network will ensure that the debt company you are provided with is a legitimate and respected company. This is the most efficient way in finding the best debt settlement companies and increasing your chances of eliminating your debt.

As you can see, these are just the main differences between debt settlement vs bankruptcy. If you decide to file bankruptcy, your best bet will be to consult with a bankruptcy attorney. However if you prefer to go with debt negotiation, is best to find out more details about the do it yourself approach and the debt settlement firm. Hopefully, this will help you in your quest to eliminate your debt and make a final decision as to what program is best for your particular situation.

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