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Debt Relief vs. Bankruptcy
Debt settlement can be a wise alternative to bankruptcy
- Debt settlement is not the perfect solution for
absolving debt, but it is a solution. Like other programs and options, it has its pros and cons that need
to be weighed and measured before committing to any debt relief program. However, if you are considering
bankruptcy, debt settlement is usually a better solution and will make less of a negative impact on your credit score.
It is important to understand when to choose debt settlement over bankruptcy. Debt relief is a great option for anyone who currently has over $10,000 in unsecured debt, still has an income or can afford to pay some of their monthly payments, and is currently behind on all or most of their unsecured credit accounts. Debt settlement however, cannot help with mortgage payments, auto payments and/or student loans. If these are your issues, you may need to seek legal advice about pursuing bankruptcy or other alternatives. However, if medical bills and credit cards are the biggest contributor behind your ever increasing mound of debt; d ebt settlement is a better option than bankruptcy.
Some consumers that enroll in a debt settlement program see as low as only a 45-point decline in their personal credit score, while bankruptcy usually carries a minimum of 130-point decline for average consumers. The less of a negative affect you can have on your credit score now means, the easier it will be to rebuild your credit score after you have paid off your debt settlement.
Another benefit of that debt settlement provides over bankruptcy, is the positive image it conveys about you, a borrower. While bankruptcy is seen as an easy exit ticket, debt settlement is looked upon more favorably by future creditors, because of your effort to repay some of the debt.
Another reason people may choose debt relief over bankruptcy is due to pure math. You can't file bankruptcy, chapter 7 or chapter 13, more than one time every six to eight years. Plainly, put you may have the option to claim bankruptcy again and debt relief can help alleviate some of your current burdensome debt.
However, there are some negatives to debt settlement when compared to bankruptcy. Debt settlement does not protect you against any suits the creditor may pursue to file, while bankruptcy does offer this protection. As well as, if the debt forgiven is more than $600, you will be taxed on the portion of unpaid debt, if you cannot prove that your forgiveness outweighs your assets.
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