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People who are in financial distress are often confused about what options to choose from available alternatives and unable to decide what they want. Many people mislead with false illusion that debt settlement and bankruptcy both are one and the same, which is not true at all.
A debt settlement is a process of negotiating with lender and explains to lender about your hardship and try to reduce the amount of debt you owe them. As you have to default on payments in order for a lender to start negotiating with you, by the time the lender agrees to settle debt, he uses every means to collect money form you. In this process the collection agency assigned by the lender will call you start threatening you, which may be hard for you to handle. In order to avoid all this process handled by you, debt settlement representative will do all this things behalf of you and negotiates with your lender. Also having a skilled and experienced professional negotiating on behalf of you will reap greater benefits like reducing up to 70 percent of debt.
Debt settlement can not be forced on you but it a viable option that help you in getting rid of debt with out much affecting your finance in future and I believe any one who is mounted in debt must use it before considering filing bankruptcy.
On the other hand, bankruptcy is an option that ruins all your lines of credit in future by leaving negative remark on your credit report and on public records. There are two types of bankruptcy that any person can file in life time with sound financial distress. They are chapter 13 and chapter 7 bankruptcy. With chapter 13 bankruptcy, person is allowed to keep the property with him, which otherwise may be lost such as mortgage home that was used to obtain loan and the person pays off the debt over a period of three to five years instead of surrendering the property.
In case of chapter 7 bankruptcy, it is also known as straight bankruptcy, where the assets are liquidated except those that are exempted under state laws in which the petitioner resides such as the home in which he resides or the necessary equipment to continue work etc.
Bankruptcy is often filed to avoid foreclosures, repossessions or any other debt collection activities and maintain the possession of assets (depends on the state laws). Many law practitioners often ask us to weigh the financial situation before filing the bankruptcy as it does not relieve you from certain responsibilities like child support, court fines, taxes, student loans (that are federally managed or issued) and alimony. If your most of the debt is through the above mention sources then it is of no use filing bankruptcy as you will not get relief from debt and in turn that affects your credit report.
