Bankruptcy Compared to Debt Settlement

One of the main disadvantages of having debt is that the person will not realize the seriousness of the situation until he is neck deep in it. By the time he realizes the situation he is in whatever he tries he will find it difficult to reduce his debt and rather it will be mounting again. In this case it is better to take help from a professional rather than making the situation worse. Many people are ignorant regarding the credit card debt management programs available nowadays. The number of companies offering help in this field is huge nowadays, so select the company with care. An inexperienced company can even worsen the current financial situation of the person.

Analyze Current Debts

The first step is to analyze and make a list of all the current debts and credit card bills. Once the person has got this list in order then he can go to an experienced debt consolidator for credit card debt consolidation. Most of the companies offer their services based on the type of debt, the person income, spending pattern etc. Once all these have been analyzed by a debt consolidator they will start with the debt consolidation program. As the initial step the person will be asked to sign some papers read the papers carefully before signing them. These documents contains all the details regarding the interest rates, amount to be paid to the company and also the letter authorizing the company to talk to the creditors regarding his financial situation on his behalf.

During the meeting of the consolidator and the creditors, the consolidators will negotiate so as to reduce e the overall amount to be paid by the person. The consolidators are usually successful in reducing the amount by a large value. This is one of the most efficient credit card debt management programs available today to escape bankruptcy.

Get out of Mounting Debt

Getting out of mounting debts comes down to making a choice between the two options. These two options include opting for debt settlement or opting to file for bankruptcy. A number of consumers find it easy to file for credit card debt bankruptcy as it seems to be the easiest solution and has been done for a number of years. It is always wise to compare the two options and then decide what the best way is. This always works out much better than taking an impulsive decision and filing for bankruptcy without knowing the consequences.

When we begin to examine the impact of both the options on the debts owed, it is clear that with credit card debt bankruptcy, one is not required to pay off most of the debts. One can get a clean financial start in most cases. There are however some exceptions like child support payments, taxes, alimony payments etc. which are not included and one is still responsible for paying them.

Debt Settlement Consolidation

With the option of debt settlement consolidation, the creditors agree to settle for a lesser amount. A debt settlement company can help in getting a lot of reductions. The debts might actually be settled for half the amount originally owed to the credit card companies.

One should also examine the impact of both these options on an individual’s credit score. The fresh financial start given by credit card debt bankruptcy does not come straight away. It might not come from seven to ten years actually. During this entire time, one is likely to have a much lower credit score. Debt settlement reduces the debts so one does not have to pay them in full. This does impact one’s credit score and credit report to an extent but it is for a lesser duration than that after bankruptcy.