Best Debt Solution: Bankruptcy or Debt Settlement?

Debt has always been one of the biggest financial problems of people not only in the country but in other parts of the world as well. It must be human nature to spend money that are not yet in their hands. It might also be due to poor financial choices or media’s over glorification of spending money on things that people barely need. Whatever the reason is that you got to be in this predicament in the first place, it is important to act now to find the suitable debt solution for you before it is too late. Two options you have include debt settlement and bankruptcy. Here’s a closer look at these two choices so it would be much easier for you to come up with a sound decision.

Debt Settlement

In debt settlement, you negotiate with your creditors so that they would reduce the total amount of money you owe from them by 40 to 60 percent. It is possible for creditors to agree to this settlement because filing a lawsuit or chasing after you for collections might be more costly not only in terms of money but also in their time. Debt settlement seems like a too-good-to-be-true option but if you can go about this the correct way, it can give you instant relief and help you get back on your feet in no time. Of course, this option has certain disadvantages. For example, the forgiven debt is taxable. Not only that, it will also have a negative impact on your credit rating but at least, it is only temporary.

Bankruptcy

Bankruptcy, on the other hand, can help you wipe out your debts in two forms: Chapter 7 and Chapter 13. In Chapter 7, all your debts will be cleared. You can start anew. But all your non-exempt properties will be taken by a court-appointed trustee. These properties will be sold and the profits will be used to pay for your creditors. This type of bankruptcy can impact your credit rating for up to10 years. Chapter 13, meanwhile, is a court-mandated repayment plan that allows you to settle your debts with much lower monthly payment rates.

What’s the Better Choice?

The answer to this question ultimately depends on you and your unique circumstances. If you do have access to cash that will enable you to settle your debts, then debt settlement can be the ideal option for you so that you won’t need to go into bankruptcy. But if you don’t and you have already tried other debt solutions like debt consolidation but none of these has worked for you, bankruptcy may be the only last resort for you. Think many times before you make a decision.  

Getting Legal Help

Whatever route you choose to embark on, it is necessary that you hire legal counsel. A financial lawyer will make things much easier for you in terms of managing finances, processing paperworks, and generally, getting you back on your feet.