Debt Settlements Vs Bankruptcy - What's the Difference Between the Two?

Critics of debt settlement would like you to believe that there is absolutely no difference between a settlement and bankruptcy. There are some similarities between the two. In both cases, your credit score will take a hit and your credit history will indicate that you did not repay your debts in full. However, these similarities are not absolute. The credit score hit by bankruptcy will remain low for very long time.

Law requires the credit history to disclose that bankruptcy was filed by the individual for eight years. On the other hand, you can start the process of improving your credit scorer from the moment you get your debts settled. Further, you can always request your lender not to indicate that you have settled your debts to the credit bureau.

There is a lot more to debt settlement beyond the impact on credit history. Settlement leads to reduction of debt. Bankruptcy does not lead to reduction of debt. Rather, it is discharge of debt where a court appointed official takes charge of your assets and liquidates it to repay all your liabilities in a proportionate manner.

In case of a debt settlement, you negotiate with your lender, either personally or through an agency, and obtain the lenders consent in the form of a written deal. In case of bankruptcy, you simply approach the court and seek protection from your creditors. Your lenders do not have any choice or say in the matter. They have no choice but to accept whatever payment is offered after liquidation of debts.

Did settlement is never absolute. The maximum waiver that you can get from your lender is 70 % - 75 %. On the other hand, bankruptcy does not involve any waiver at all. If money obtained by sale of your assets is sufficient to repay 90 % of your liabilities, then you would have escaped a very small portion of your debt.

The social consequences of debt settlement are insignificant. On the other hand, if you opt for bankruptcy, the entire world will come to know about it. Your future employers, spouse, relatives and friends can search for your bankruptcy details on the World Wide Web. On the other hand, settlement is nothing but a private arrangement between you and your lender.

If you are over $10,000 in unsecured debt it would be wise to utilize a debt relief network instead of going directly to a debt settlement company. Using a debt relief network guarantees that the debt settlement company you choose has been certified and has established success in negotiating settlements. They are free to use and a good starting point to begin your debt relief process.

Debt Relief Network.