What is the Differences Between Debt Settlement Or Filing Bankruptcy?


The Law - Bankruptcy is a legal process, and the ultimate decisions regarding how the debt is treated is decided upon by a judge or justice. This means that once the bankruptcy is ruled upon by a judge there is no going back. Settling debt is not a process taken up in a courtroom, and so an attorney is not necessary in order to go through the process.

Impact On Your Life - Bankruptcy can, depending upon which form of bankruptcy you file for, affect every part of your life. All of your possessions, all of your bills, all of your income and so forth are counted up and considered as the bankruptcy trustee decides where and how money is used to pay off your debts. Debt settlement is treated differently, putting more control into the hands of the consumer. However, debt settlement does not offer legal protection against lenders; it is more of a business transaction than a legal proceeding.

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Impact On Credit Score - A bankruptcy can help wipe out debt, some of which will be wiped out without you having to pay any money towards them. As a result, a bankruptcy will add a major black mark to your credit report that will stay there for up to a decade. Settling your debt does not erase your debt; it lowers the amount you owe and allows you pay a much lower rate. A debt settlement company will work on your behalf to lower the amount you owe, which is much different than erasing your debts. As a result, your credit score will take a hit, but nowhere near as severe as in a bankruptcy case.

Impact On Your Debt - As previously mentioned, filing for bankruptcy can eliminate some of your debts completely if you present your hardship well enough. A debt settlement company, no matter how good it is, cannot make all of your credit card debt or medical bills disappear. Also, debt settlement has nothing to do with secured debt, such as a mortgage, car loan, etc.

Cost - A bankruptcy attorney may charge thousands of dollars as a flat fee depending upon the complexity of your case, the type of bankruptcy you file for, etc. A debt settlement company will most likely charge a percentage of your debt as a fee, so their fee will most likely be dependent upon the total amount of unsecured debt you owe.

For people facing mountains of debt, they can use military terms to put bankruptcy and debt settlement into perspective. Bankruptcy is almost like an atomic bomb, destroying everything in its path in order to solve the debt problems. A Debt settlement Company can usually offer you a better solution.


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