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But which financial decision is better? Bankruptcy can have near-fatal effects on your credit rating for years to come, making it hard to recover from.
Debt settlement appears to be the solution because creditors work with you, and sometimes you only have to pay back a fraction of the unsecured debt.
Another perk to debt settlement is that your credit score will not suffer quite so gravely.
There are two types of bankruptcy- Chapter 7 erases your entire debt and lets you start with a clean slate, but leaves you with a negative credit rating that will not go away fast.
Chapter 13 bankruptcy works with you to repay the debt- this repayment term lasts between three and five years.
If there is still debt not paid off when the term is over, the amount is generally erased.
Even though Chapter 13 is less harmful, the consumer still is better off going with the debt settlement program.
Debt settlement programs put you in control of the situation.
Generally, you pay a monthly fee that the organization assigns, based on your collective debt.
It is more guaranteed that you will become debt free because creditors typically close the accounts, so interest rates and fees are no longer accruing on your account.
The non-profit organization works with individuals and creditors to get rid of unsecured debt.
Try to avoid going to debt negotiation companies but rather debt relief organizations.
Legitimate companies must pass an ethics standards test, proving that they are out to help the customer.
It is important to do research before picking an organization because the last think you want is to find yourself in a scam - and end up further in the hole.
If you have doubts about the organization or company you are looking into for debt relief, ask your local bank or credit union for advice or even a recommendation.
They most likely will be willing to help their customers become debt free.
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