Many people, who fall in debt, believe that debt settlement is their only debt relief option. However, this is not true as there are various other debt relief options like debt consolidation, debt manage and even re-payment option. If you are in dire debt problem, then you can even consider filing bankruptcy as one of your debt relief options. Now, many get confused about whether to go for debt settlement or bankruptcy. There are in fact various debates on whether debt settlement is the better debt relief option or is it bankruptcy.
Which is the better debt relief option?
So, the question is which is the better debt relief option; is it bankruptcy or is it debt settlement? The answer to this question is that, it totally depends upon your debt situation and your other financial situation.
In case of debt settlement, the outstanding debt amount gets lowered by a considerable amount. As seen, debt settlement generally lowers the debt amount by 40-60%. So, it becomes easier for you to make the payments and become debt free. You can either negotiate with your creditors on your own or else, you can also get the help of a debt settlement company who will help you to settle your debts.
In case of bankruptcy, the debt does not get reduced as such. It is bit different process of discharging your debts. What happens in case of bankruptcy is that, when you file bankruptcy, it puts a stay order on your debts and as a result no creditor is able to sue you for non-payment of your bills. In addition, no lender can even foreclose your home or your car.
Now, which is the one that you should go for in order to become debt free? If you are in real financial stress, if you are hardly able to make any kind of payments even after settlement then bankruptcy is your debt relief option. Many say that debt settlement is better than bankruptcy. While, others are of the opinion that bankruptcy is better than debt settlement.
The people who argue for settlement claim that settlement lowers the debt amount and though bankruptcy discharges most of the debts, it hurts your credit badly. On the other hand, the people who argue for bankruptcy are of the opinion that debt settlement too hurts the credit score s the person needs to miss payments in his accounts before the debts can be settled with the creditors. Moreover, bankruptcy also gives a fresh start.
In case of bankruptcy, if you file chapter 7 bankruptcy, the bankruptcy trustee sells off most of your assets to pay your creditors. If your assets are not enough to pay your creditors the other part of the debt gets discharged. In case of chapter 13 bankruptcy, the court sets up a repayment plan and you are required to make the payments as per the repayment plan. If you are able to make the payments as per the repayment plan throughout the term, and if some part of the debt is left after the bankruptcy is over, that debt amount gets discharged.
However, it is true that bankruptcy does hurt your credit more than debt settlement. So, if you have lesser debts and if you think that your monetary situation is going to improve soon, you can opt for debt settlement. But, you should also know that there are some grater advantages of bankruptcy. Bankruptcy is a legal binding while settlement is not. So, the creditors are bound to agree to the bankruptcy agreement.