4 Reasons To Use Debt Settlement Instead Of Bankruptcy

Posted on: 6 June 2016

Getting into debt is very easy to do, yet getting out of it is not easy in any way. If you are ready to take charge of your finances by getting out of debt, a visit to a lawyer is a good option. Lawyers that specialize in debt solutions are skilled and experienced with numerous types of methods, and two common ones are debt settlement and bankruptcy. As you view these two options, you may want to stick with debt settlement for these three reasons.

It Will Not Affect Your Credit As Much

Filing for bankruptcy is one of the worst things you can do for your credit, primarily because the bankruptcy will remain on your report for at least seven years. For Chapter 7 cases, it will remain for 10 years. It is reported as a public record, and this is considered a derogatory item.  This is a long time to have to deal with a bankruptcy charge on your credit, and there is nothing you can do to get this removed from your report.

Debt settlement is not something that will be reported on your credit report on its own. It may affect the accounts you have on your report, but you are not likely to see it listed as a public record or as a derogatory item. Any accounts you have that are settled may have notes included on them. The notes may state that the accounts were settled for an amount less than what was owed, but this is much better for your credit report than bankruptcy or having your debts listed as unpaid debts.

You Could Pay Less

If you make too much money, you will not qualify for Chapter 7. Chapter 7 is often the more preferred branch of bankruptcy, because it allows you to get out of paying your unsecured debts. If you have to file Chapter 13, you could end up being required to repay 100% of the debts you owe.

With debt settlement, you may be able to get by with repaying only 50% of the debt owed. This percentage is not set in stone, and most creditors have certain percentage guidelines they follow when agreeing to settle a person's debt. If your lawyer is really good at negotiating, you might be able to pay even less for the debt you owe.

The Stigma Is Not As Bad

One of the worst parts about filing for bankruptcy is the stigma that goes along with it. You may be asked on loan or job applications about this, and stating that you have filed for bankruptcy might appear as a negative thing. Debt settlement is much more secretive. In fact, you will not have to tell anyone you are filing, and it will never be something you are asked when you apply for a loan.

You Can Avoid Court

Finally, choosing to use debt settlement instead of bankruptcy will eliminate the need for you to go to court. Going to court takes time and can be extremely intimidating for some people, and it is a required part of all bankruptcy proceedings. If you want to stay out of the courtroom and get rid of your debts without a judge or trustee, choosing debt settlement is a much better choice for you.

There are a variety of different ways to get out of debt, and every case is different. This is why you should talk to a lawyer that specializes in debt solutions for more information, because this will allow you to find out all your options and which one will be best for you and your personal situation.