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Debt Settlement or Bankruptcy?

courtesy of United Debt Counseling

Having trouble with your credit card bills? Trying to decide between Debt Settlement versus Bankruptcy? Two of the most probable options available to people seeking debt relief are bankruptcy or debt negotiation. With the economy struggling to recover from a recession and unemployment numbers at an all time high, people are facing the reality that they may need debt settlement or bankruptcy in order to survive. Debt is a part of most people’s lives, but having too much debt can make living an enjoyable life difficult.

There are two potential solutions to resolving an unmanageable debt problem. One may be filing for bankruptcy, but perhaps a better alternative would be using a debt settlement company. Before committing to either of these options, it's important to know the pros and cons of using a debt settlement company versus filing for bankruptcy to resolve your debt situation.

The decision to file bankruptcy is one that must be thought through thoroughly. The lasting negative effects can limit financial options and the ability to obtain future credit. Bankruptcy often carries long term derogatory effects on credit scores, financial management and understanding from future lending sources. There are different types of bankruptcy, each having its own guidelines and limitations.

Though bankruptcy may be a very good solution to a severe debt problem, filing carries negative effects that follow a debtor for a relatively long period of time. The debtor may lose property that is non-exempt (unprotected) and have to start over again in fulfilling their lifelong goals. Bankruptcy will appear on your credit report for seven to ten years depending on which type of bankruptcy is filed. Chapter 7 will normally be reported for 10 years because it does not involve any form of repayment plan to creditors and debts are completely discharged. Filing Chapter 13 may carry less of a dishonor and usually remains on your credit report for 7 years because the debtor arranges to repay a portion of the debt. 

Debt Settlement is a proven successful approach to debt reduction. This may be appropriate for individuals with a serious amount of debt or who are considering bankruptcy. A Debt Settlement Company negotiates with creditors to settle debts for a lower amount than owed. This is accomplished by the debtor saving money for a lump-sum settlement payment. After the debt is settled, the creditor will send a letter stating the debt obligation is fulfilled. The same information is reported to credit bureaus in one of three ways:

  • The debt has been, "Settled for less than full amount"
  • The debt has been "Paid"
  • The debt has been "Settled"

Term settlements are settlements where creditors allow us to make monthly payments on the client’s behalf. This is normally done for large debts where although there is a substantial savings, it is too much for the client to make in a lump sum. Basically, it's a payment plan that is normally 6 months or so.

To learn more about United Debt Counseling financial contact them at 1-800-665-9981 and one of our Certified Credit Counselors will review your individual financial circumstances and will recommend one or more programs that can provide the solution and goal you are looking for. United Debt Counseling (UDC), founded in 2001, has a financial team with more than 20 years of experience in creditor relations, negotiations, settlements, arbitration, financial literacy, and counseling services.

Comments

 

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April 5, 2010 2:50 PM
 

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April 6, 2010 12:21 AM
 

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April 6, 2010 12:46 AM
 

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April 6, 2010 1:42 AM
 

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April 6, 2010 1:50 AM
 

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April 6, 2010 4:25 AM
 

Debt Arbitration said:

One thing I've learned is that don't be afraid to seek professional help from non-profit organizations. It's not a sign of defeat, it's a sign that you're taking control again and you need help.

April 6, 2010 7:27 AM
 

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April 6, 2010 9:13 AM
 

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April 6, 2010 10:41 PM
 

bankruptcy credit report said:

A lot of us face a similar dilemma. Because of the hardship involved in paying off debts, a lot of us decide to finally file for bankruptcy. After all, this option assures us of the partial or even the total elimination of our debts. By having bankruptcy credit report, we can have a fresh start for us to gradually rebuild our credit histories.

April 8, 2010 5:31 AM
 

genniechan said:

A lot of us face a similar dilemma. Because of the hardship involved in paying off debts, a lot of us decide to finally file for bankruptcy. After all, this option assures us of the partial or even the total elimination of our debts. By having bankruptcy credit report, we can have a fresh start for us to gradually rebuild our credit histories.

April 8, 2010 5:34 AM
 

Mike Killian said:

The problem I have with debt settlement is twofold:  1. it too destroys your credit because the debt settler cannot do to much to settle your debt until the creditor thinks settlement is the best recourse which means the creditor has received no payment for roughly 3 months...  This in affect will destroy a person's credit.   2.) I rarely find a debt settlement company making the announcement to a potential client that any debt forgiven above the amount of $600 receives a 1099 from the IRS that says the forgiven amount is taxable by the IRS as added income.  That fact is stated I find of buried in the advertisement in very fine print.  Mike Killian <a href="http/.../" target="_blank">Learning Credit and Debt Management</a>

April 20, 2010 7:22 PM
 

Mike Killian said:

My sincerest apologies for the bad link from my last post... I am a little knew at this blogging "stuff"  bu very experienced in my knowledge of debt reduction.

April 20, 2010 7:46 PM
 

christophob said:

Debt settlement is a best alternative when compared to bankruptcy.It helps to <a href=”http://debtsolutionsgrp.com/”> Negotiate credit card debt </a>,Unsecured Loans ,Unsecured Personal Loans and many more.

May 5, 2010 3:07 AM
 

Debt Settlement said:

Debt settlement is always  a better option than bankruptcy without a doubt. It saves future finance and a bad name in the market. Depending upon the actual financial condition of the debtor, bankruptcy should be the last option.

May 14, 2010 6:29 AM
 

Consolidation Loan Debt said:

Very nice post . I completely agreee with this point is it is alwayz better to have settlement rather then bankrupty depending on the financial situation.

June 3, 2010 4:22 AM
 

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June 28, 2010 1:43 AM
 

Debt Settlement said:

Debt Settlement is a proven successful approach to debt reduction.

********

Kevin

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October 1, 2010 11:48 AM
 

Bankruptcy Lawyer said:

Most will have tried other forms of debt settlement before they file for bankruptcy.  Debt settlement is the legal process in which a debtor and creditor negotiate a significantly reduced balance that will then be paid off in monthly installments. For people with unsecured debt like credit card debt and medical bills, before they file for bankruptcy, debt settlement is the first option to pursue. More information about debt settlement and bankruptcy visit : - (www.bankruptcybalance.com)

February 11, 2011 2:28 AM
 

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March 10, 2011 7:23 PM
 

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April 20, 2011 11:29 AM

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