Bankruptcy and debt settlement are two of the most popular ways to find debt relief from large amounts of debt. Both systems allow you to lower the amount you owe to creditors, but do it in completely different ways.
Deciding which of the two methods to use is difficult, but this helpful chart can outline the differences between each to help you decide which is best for you.
|
Debt Settlement |
Bankruptcy |
| Monthly Bills |
If you have enough to pay your bills but can only afford the minimum monthly payments, Debt Settlement can lower the amount you owe to get you completely out of debt faster. |
If you aren’t making enough to pay your monthly bills, bankruptcy can help you absolve all of your debt immediately. |
| Lenders |
You can continue to get calls from bill collectors and accumulate late fees as you wait for a settlement to be reached. |
After filing bankruptcy, your creditors won’t be allowed to contact you any more requesting payments. |
| Credit Score |
Debt Settlement could possibly lower your credit score by a small amount if you miss payments while a settlement is being negotiated. |
Bankruptcy could cause your credit score to plummet by 250 points or more. |
| Credit Report |
Your accounts will appear on your report as being “paid” or “settled,” and shouldn’t affect your financial standing. |
Bankruptcy will stay on your credit report for as long as 10 years and can keep you from opening new lines of credit, applying for a loan, finding a place to live or getting a job. |
| Timeframe |
Debt Settlement lowers your payments by such a significant amount that you could be completely debt free in as little as 12 months. |
Bankruptcy can absolve your debt immediately, but can require as many as 10 years before you will fully recover. |
| Cost |
All you pay is a one-time fee to the debt settlement professional that negotiates lower rates and payment amounts.. |
Filing for bankruptcy will require you to pay for a lawyer, application forms and even court fees. |
Bankruptcy should be considered only as a last resort. The effects of filing for Bankruptcy protection are long-lasting - up to 10 years in certain states. Recently the rules for filing Bankruptcy changed, and it is now harder than ever to wipe the slate clean.
There are two types of bankruptcy protection: Chapter 7 and Chapter 13. Each one has its own pros and cons, and the right filing for you depends on a number of different factors. In the end it’s best to consult a bankruptcy lawyer to discuss your specific scenario, but this should only be done as a final resort after all other options have been exhausted.
Before you go bankrupt complete the form to the right and find out if you can relieve your
credit card debt without filing for personal bankruptcy!
Bankruptcy Alternatives
US Bankruptcy Laws
Find out about your states bankruptcy laws to help decide if bankruptcy is a good option for you.
Bankruptcy Alternatives:
Solutions to debt problems that do not involve filing for bankruptcy. These include debt settlement.
Bankruptcy Lawyers:
Lawyers that specialize in the bankruptcy process. Typically, however they are uninformed or uninterested about bankruptcy alternatives available to people in debt.
Bankruptcy Rules:
There are many rules that govern the bankruptcy process. The requirements have become much stricter than they were even just a few years ago due to changes in bankruptcy law.
Benefits of Bankruptcy:
Bankruptcy can allow a person or business a fresh start but at a terrible cost to pay, with long-lasting consequences.
Chapter 11:
This chapter of the U.S. bankruptcy code provides for the reorganization of a corporation or partnership. Individuals in business can also file under Chapter 11.
Chapter 13:
This chapter of the U.S. bankruptcy code provides for the reorganization of individuals in which all or some of their debts are repaid, as opposed to their assets being liquidated.
Chapter 7:
This chapter of the U.S. bankruptcy codes provides for the liquidation of an individuals or a company’s assets to settle debts with creditors.
Declare Bankruptcy:
Generally speaking, declaring bankruptcy is something that should be avoided at all costs. TV lawyers may tell you that this is the way to go, but don’t believe it. Other programs such as debt settlement are far more successful for reorganizing one’s personal finances, without the damaging consequences of bankruptcy.
Going Bankrupt – This is often one of the unfortunate end results when consumers are overburdened with debt. Fortunately, going bankrupt can be avoided in most cases with the aid of a debt settlement or debt management plan.
Filing Bankruptcy:
Bankruptcy should be considered only as a last resort. The effects of filing for Bankruptcy protection are long-lasting - up to 10 years in certain states. Recently the rules for filing Bankruptcy have changed, and it is now harder than ever to wipe the slate clean.
How To File Bankruptcy:
Filing for bankruptcy is a complicated legal process best left to the experts. A bankruptcy attorney is always recommended. However, debt settlement is a far better solution for debt than bankruptcy.
Personal Bankruptcy:
Federal law allows for an individual or business that is unable to pay off their debts to reorganize by filing for bankruptcy. It is a very stressful process that will all but put an end to one’s credit rating for a very long time.
The decision to reach out for help with your debt is not one that's easy to make. You were raised to "do the right thing", but now it’s nearly unbearable. You struggle along while your creditors are turning up the heat. And now you’re at the point where the late fees, penalties and interest expense make it impossible to keep your head above water.
Ask yourself this. If you could eliminate your debt without permanently damaging your credit, why wouldn't you?
