Bankruptcy vs Debt Settlement: Which One’s Better for You?

Getting in debt is a common problem for many people; but while it may seem like a daunting situation, it’s far from the end of the world.

There are plenty of options out there that can help you manage, if not eliminate, your financial woes. However, getting out of debt is also far from a walk in the part. Before anything else, you have to make sure that the method you choose to clear your debt is the one that’s best suited for your situation.

Often, people who are deep in debt are left with 2 options, bankruptcy and debt settlement. Let’s take a closer look at these to see if going with one or the other will help you become more financially stable.

A Short Look at Bankruptcy

People often view the day they file for bankruptcy as the lowest point of their lives, but this need not be the case for you. Given the right circumstances, filing for bankruptcy can mean getting a clean slate and starting fresh. Bankruptcy is often the preferred option of those who:

• Can only make minimum payments on their credit cards
• Need to take high interest loans and cash advance to make ends meet
• Have lost a major source of income or have high expenses like medical bills
• Resort to using credit card to pay for essentials expenses like rent and utilities
• Are under the threat of foreclosure or property repossession
• Are losing sleep over money issues or fear interacting with debt collectors

There are different types of bankruptcy. A Chapter 7 or liquidation bankruptcy will leave you with your home, car, and work equipment, but it can take away your non-essential properties. A Chapter 13 or wage earner’s bankruptcy, on the other hand, allows you to pay your debts within 3 to 5 years. It’s an option for debtors who want to clear their unsecured debt while taking care of their other financial obligations.

Filing for bankruptcy is a scary option for many, and rightly so, as it has its own set of repercussions. But with the help of a Chapter 7 or Chapter 13 bankruptcy lawyer in Arizona, you can clear your debt and minimize your losses at the same time.

Debt Settlement

Debt settlement is an ideal option if you want to reduce the amount you owe. It can be done with the help of a debt settlement agency who will talk to your creditors on your behalf. They’ll negotiate so that you can clear your debt by paying a lump sum, which is just a fraction of the cost of the actual debt. The entire debt settlement process can be concluded within 24 to 36 months.

Debt settlement probably costs more than bankruptcy, and it takes more work if you have to negotiate with more than one creditor. At the same time, your creditors are under no obligation to accept settlement offers. However, this option does provide you the chance to reduce your balance by up to 60 percent.

A Balanced View of Your Options

You need to closely assess your current finances and capability to pay before settling on one option. It’s best to remember that every debt issue is unique. To make an informed decision, it’s recommended that you get in touch with lawyers and financial experts who can go over the details of your debt with you.

Once you know exactly where you stand, a good bankruptcy or debt relief firm will provide you with options and the pros and cons of going with each. They should also point you to a program that is tailored to your circumstances, not the other way around. Finally, they should keep you informed every step of the way, serving as a reliable partner in your pursuit of a debt-free life.