Filing Bankruptcy

When you are unable to pay your creditors, you can enroll in a debt settlement program to get rid of your bills. You may even consider declaring yourself bankrupt. Before opting for either of the options, you must weigh its pros and cons. Some of the advantages of debt settlement as compared to a bankruptcy claim are:

•    Free consultation: When you enroll to obtain services of a debt settlement company, it will offer you free counseling. But before filing a bankruptcy, you must contact a lawyer to find out if it is the right option for you. The lawyer may charge you consultation fees.

•    Do not lose assets: Settlement helps you get rid of all your unsecured debts without losing any of your assets. On the other hand, if you file chapter 7 bankruptcy, you will lose your non-exempt assets.

•    No attorney required: For paying off your bills through a debt settlement program, you do not require hiring an attorney. Where as, in the case of bankruptcy, you need an experienced attorney to represent you in court.

•    Become debt free soon: You can settle your bills within 2-4 years. But if you file a chapter 13 bankruptcy, you can get your unsecured bills discharged by your creditors only after paying them for 5 years.

•    Less impact on credit score: Bankruptcy lowers your credit score more than a settlement program does, making it difficult to obtain an unsecured credit card after bankruptcy. When you settle your bills, it gets listed as ‘paid as settled’ on your credit report. The negative listing may remain up to 7 years. Where as, chapter 13 bankruptcy remains as a negative item on your credit report for 7 years and chapter 7 bankruptcy remains for as long as 10 years.

It is true that debt settlement is a better option than claiming bankruptcy to get rid of your bills, but it may not always be possible to settle bills. For settlement, you need to save money in a trust account each month. So, if you cannot afford to dedicate some amount each month towards your debt, you may have no other option than filing a chapter 7 bankruptcy.

For more information on how to claim bankruptcy and for a list of other alternatives, please feel free to take a look around our site.

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