Debt Settlement vs. Bankruptcy - A Comprehensive Comparison Of Debt Settlements and Bankruptcy

Sept. 15, 2009 - PRLog -- When it comes to debt settlement and bankruptcy there is a big difference between the two. In order to make an informed decision you need to make a comprehensive comparison of these two options. Each year a number of people get new credit cards due to the downturn in the economy. While many try to use their cards sparingly, the difficult economy requires individuals to start using their credit cards for everyday purchases. As a result, many are faced with huge credit card debts they can't afford and are struggling to pay off. Consider the differences between bankruptcy and debt settlements so you can determine which is the best course to help you get out of debt.

When it comes to bankruptcy, you have two options: Chapter 7 and Chapter 13. Chapter 7 is a form of liquidation and Chapter 13 is reorganization. When you choose Chapter 7, all of your qualified debt is wiped clean and you can start fresh again. However, this option does have negative effects on your credit score for about seven to ten years. As a result, you can have a hard time getting a loan, job or place to live. A Chapter 13 bankruptcy is a lot different since it reorganizes your existing liability. Your debt is put into a repayment plan that has a specific period such as three to five years. After this period, your unresolved debt is forgiven and wiped clean. However, this one also has a negative effect on your credit score for several 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.

If you want to find the top performing debt settlement companies then here's some very important advice. Do Not go directly to a particular debt settlement company but instead go to a debt relief network that is affiliated with several established debt settlement 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.

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