Sunday, July 17, 2011

Debt settlement vs. bankruptcy – Which is the better option?

by Rick Murphy

When in debt people try to find out the different debt relief options, through which they may be able to become debt free easily enough. Now, there are various debt relief options that you can take advantage of. Debt is almost become a part of our lives. But, rather than despairing about the fact that you are in debt, it is better for you to try out the different debt relief options. Among the different debt relief options,   debt settlement  (  is quite a popular option. It helps you in lowering the outstanding debt amount. However, some people prefer filing bankruptcy in order to get out of debt.

Which is better?

Amongst the different debt relief options, debt settlement is one such option that helps you in lowering your outstanding debt amount. Thus, it helps you in paying off your debts easily enough.

You can settle your debts on your own or else, you can get the help of a debt settlement company who will negotiate with your creditors to lower the outstanding debt amount. Generally, settlement can help you in lowering the debt amount by 40-60%. Thus, it becomes really easy for you to pay off your debts.

On the other hand, if you file for bankruptcy, which is another debt relief option; you may be able to get a fresh start. Bankruptcy has various advantages and the greatest advantage is that it puts a stay order on your debts and collections.

That is, no creditor can sue you for the unpaid debt and the interest rates won't accrue too. Moreover, you will be able to include even your secured debts in the bankruptcy program. However, in case of debt settlement, you won't be able to include the secured debts in the program. So, which do you think is better for you?

Now, which is the better option will actually depend on your mentality, your debts and your financial situation, and also your eligibility. So, first of all you will have to start analyzing all of your debts, if you have unsecured debts in majority or if it is secured debt mostly. Then, you will have to decide as to your eligibility. Not one and all are eligible to file for divorce. You may have to go through a means test before you can file bankruptcy under Chapter 7.

Other than this, you will have to decide on your financial condition and your affordability. If you think that you still can afford to make the debt payment after settling the dues, it is better for you to opt for debt settlement rather than bankruptcy.

But, if you think that even if you opt for debt settlement, you won't be able to become free of your financial obligations, you can opt for bankruptcy.