Debt Settlement Vs. Bankruptcy

With today's economic struggles, debt is at an all-time high as the stock market hovers at around or below 9,000. As American's continue to struggle with debt, record numbers of consumers are filing for bankruptcy through a bankruptcy lawyer or for debt settlement through a debt settlement lawyer. For example, nearly 1.6 million in 2003 filed for bankruptcy. The numbers have even grown since then.

If you’re financial situation is the result of an illness, unemployment, divorce, or overspending, getting debt relief can be tough. People may offer easy ways to get out of debt, but you must be careful because you may fall victim to debt settlement scams, and you should know how to avoid debty settlement scams. If debt has taken over your life, try debt settlement or then the bankruptcy route.

Debt Settlement
Debt settlement can help consumers improve their financial situation and provide immediate relief from creditor harassment.

A debt settlement lawyer will contact each one of your creditors and each collection agency to stop:

• The late fees
• Penalties
• Premiums building up on all accounts.

The lawyer will establish agreements so that the credit card companies and collection agencies will contact the attorney instead of the consumer. It is also the responsibility of the debt settlement attorney to obtain the consumer’s credit report and work to remove any misleading, unsubstantiated or incorrect items. They can even give you a long term plan to raise your score.

With debt settlement, you can usually get debt relief within two to three years and you typically end up paying back between forty to sixty percent of what you currently owe.

The creditors want whatever they can get in this economy, so a debt settlement lawyer can get you up to 60 percent off what you owe.

Bankruptcy is another option for debt relief, but it’s generally considered the option of resort after you consider debt settlement through a debt settlement lawyer. This is because of its long-term negative impact on your credit. A bankruptcy stays on your credit report for up to 10 years, and can hinder your ability to:

• Get credit
• A job
• Insurance

Debt Settlement can also hurt your credit score temporarily, but in the long run, it's better to get debt relief through a debt settlement than to file for bankruptcy if you want a better credit score sooner.
It is critical to understand all your options prior to making such a decision on which route to take.

Different Kinds of Bankruptcy
Debt settlement is entirely different than bankruptcy.  There are two types of bankruptcy, Chapter 7 and Chapter 13. 

• Chapter 7 bankruptcy basically erases your unsecured debt and lets you start over financially, although you will have a large black mark on your credit report. 
• Chapter 13 bankruptcy sets up a repayment plan that typically lasts 3-5 years, giving you time to repay your debts.  After this time period, any remaining unpaid debts are erased.  Debt settlement is similar to a Chapter 13 bankruptcy case in the sense that you will be paying back only some of the debt that you owe over a certain amount of time.

Final Verdict – Differences
In the end, debt settlement is the first option you should see if you can go ahead with. If that is not right for you, bankruptcy is also an option an attorney can give to you.

Unlike bankruptcy, your debt settlement does not stay on your records. Record of a bankruptcy file can stay on your records for up to 10 years, as opposed to debt settlement , which is not on your record at all.

Debt settlement is different from Chapter 13 bankruptcy because in Chapter 13 bankruptcy, the court decides how much you can afford to pay and sets a budget for you.  In a debt settlement program you and your attorney are in control and pick what you can pay.

Debt settlement and bankruptcy are different in principle as well.  Debt settlement with a debt settlement lawyer is a way to seek to overcome the burden of debt in an honorable manner.  Bankruptcy should be chosen after debt settlement, for those who have suffered a tragedy that has left them crippled financially.