Debt settlement is unquestionably a better option than bankruptcy because of various reasons. These reasons are discussed below. A comparative study is give so that you can understand why debt settlement is unquestionably a better option than bankruptcy!
· Bankruptcy requires a person to actually qualify for the same. The person has to go through severe credit counseling session. If the counselors think that the consumer is in a position to repay the debts with a slight modification in the budget, the person will not be allowed to file bankruptcy. This is not the case with settlement. Anyone who has an overall debt of $10,000 or more is eligible for settlement.
· Bankruptcy has legal hassles and the consumers need to visit court and contact the attorneys. This is not required in debt settlement. Settlement is a completely legal method and the consumers can do away with court or attorneys.
· Bankruptcy takes a very long time to complete. Settlement on other hand takes a shorter period of time. A typical settlement negotiation takes 1-3 years to complete which is far shorter time frame compared to bankruptcy.
· After successful bankruptcy filing, the consumers lose their credit score and they lose their credibility. They are then unable to get any further credit for 7-10 years that follow. After that time, the consumers become sub-prime consumers. On the contrary, in a settlement process, the credit score of the consumer goes down but as soon as the settlement is complete, the creditor gets back the credibility and remains a prime consumer.
· Bankruptcy affects the creditors as well. The creditors lose their liquidity and they are unable to cover their costs. The creditors therefore lose their financial balance and fail to cover their costs. Settlement on the other hand ensures that the creditors get back at least a part of their liquidity and they can cover a part of their costs with the amount of money that they get back. The remaining amount of the costs is covered by the stimulus money that has been released by the Federal govt. as a part of govt. debt relief programs.
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