Debt Settlement vs Bankruptcy
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When it comes to debt settlement vs bankruptcy, many people have skewed ideas on which one is better. Many people think that they can use either option to get rid of their debts. The truth is, that when it comes to settlement of your debts, there are pros and cons to all the options.
It's important that you take a closer look at both options to figure out which option is really going to work the best for your needs. Here is a comparison of both options to help you make the right decision for you.
Debt Settlement vs Bankruptcy 101
Make sure you read this before you make any financial decision.
Budget Considerations
When you're considering debt settlement vs bankruptcy, you need to think about your budget. If you decide to go with credit card debt bankruptcy you have two different options.
There is Chapter 13, which will allow you to pay down debts and then wipe out some of the remaining bills.
Then there is Chapter 7, which totally gets rid of your debts. The courts decide the amount you can pay, and essentially you give up control of your finances because you can't deal with your budget on your own.
When it comes to settling debts, you must be able to take your budget and get it under control. You'll work with a program of debt management, but you'll be the one deciding how much money can be set aside to pay on the debts that you owe.
As with Chapter 13, after paying for a certain amount of time, often the rest of your debts are pardoned with a good debt settlement program.
Credit Considerations
You definitely need to consider what these options are going to do for your credit and your FICO and credit scores. When it comes to credit card debt bankruptcy, usually this is not good for your credit.
Credit reports show bankruptcies for at least seven years, and some up to 10 years. While you can work to rebuild your credit history, in some cases the bankruptcy in your past can keep you from getting credit cards, auto loans, mortgages, and other types of credit.
Go with the best debt settlement program you can find, your credit report will show that you are involved in a program. This shows you are being responsible and taking care of your debts while learning how to better manage these debts. This usually is a better option for your credit report.
Choosing the Right One
Choosing between the two options can be difficult. However, when looking at debt settlement vs bankruptcy, it's usually a better option to avoid bankruptcy unless there are no other options available to you.
If you have little savings, you have no job, or you have gone through a devastating financial loss, then it may be the best and only choice you have.
However, if you have a steady income coming in and you want to eliminate your debts, then a settlement program is definitely an option you should give some consideration.
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