Many people who come to Freedom Debt Relief ask us what the pros and cons are of debt settlement versus bankruptcy. They often wonder which would be more advantageous. Is one process “easier” than the other?
Unfortunately, that isn’t something that we can immediately answer. While debt settlement is often considered a great alternative to bankruptcy for qualified candidates, you should consult with a licensed attorney about bankruptcy and whether or not it is recommended for your specific situation.
As you evaluate all of your debt relief options, you’ll also need to consider some important distinctions between bankruptcy and debt settlement.
Who it’s for?
Bankruptcy: It is often viewed as an option of last resort, but if you are carrying more debt than you think is possible to pay back, it may be something to consider.
Debt Settlement: This option is best suited for people who are struggling with serious debt, have trouble making their minimum payments, and are looking for an alternative to bankruptcy.
What are the pros?
Bankruptcy: If you qualify for Chapter 7 bankruptcy, you may be cleared of any obligation to pay back your unsecured debt. After exhausting other debt relief options, this may be an effective solution. However, after bankruptcy laws were reformed in 2005, it is now much harder to qualify for Chapter 7.
Debt Settlement: With this option, there is a potential to reduce the total amount of debt owed. Also debt settlement usually has a lower monthly program payment. Reputable debt settlement companies will only charge fees on resolved debts. If they don’t get you results, they shouldn’t get paid a dime!
What are the cons?
Bankruptcy: It’s a known fact that bankruptcy really hurts your credit. In fact, it can stay on your credit report for up to ten years. Also, the costs for filing for bankruptcy are not insignificant, so think carefully before choosing this option.
Debt Settlement: Although less severe than bankruptcy, debt settlement may have a negative impact on your credit score. In addition, creditors or collectors may still contact you during the settlement period.
I hope this will give you a better idea of what bankruptcy and debt settlement involve. If you’re not sure which one is right for you, speak to a debt specialist at 1(800) 544-7211 to find your best options!