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Settle Credit Card Debt Or File Bankruptcy? Know The Truth And Do The Best!

Debt settlement and Bankruptcy!
Both have a sacred rife and, both are very interesting and two distinct situations.
Credit card debt settlement is all about decreasing the total debt amounts you owe. Whereas Bankruptcy is bringing all of your debts to an end (at least most of them), and giving you a chance to grow your finance once again!
Hence, you can very well see, both the approaches are different, and both need different explanations.

Credit card debt settlement, or in general debt settlement means:

You negotiate with your creditors and influence them to believe, that your debts can be paid back in amounts, way-way lower than what you owe!
That’s what settlement looks like in the most ethical and lexical meaning. But, in reality this involves several procedures, where you and your creditor may enter into recurring heated arguments.
And, just because of these arguments and stormy conversations, you should do debt settlement under some professional guidance. Nevertheless, one wrong word from our side, can close all the doors to a perfect settlement deal.
This process works with all kinds of unsecured debts, which means any debt that’s not having any asset involved. These include credit cards, personal loans, payday loans, and anything that looks like only money and nothing else (like mortgages, car loans and so on).
Now settlement will hurt your credit score. Even more, if the creditor turns out real bad!
The creditor may not report the account as ‘paid off in full’ to the credit bureaus. And the credit report will show the account as ‘settled’.
This will kill your credit score!

On the other hand, Bankruptcy is all about surrendering, and:

Declaring to your creditors, that they won’t be getting much (in fact nothing) for the debts you owe to them. These debts include both unsecured and secured debts.
Here I want you to note down, that bankruptcy gets the upper hand over debt settlement, as in settlement you can only negotiate amounts for unsecured debts, but with bankruptcy all your debts are getting attention!
You have two distinct chapters in bankruptcy that you can use for addressing your financial situation.
If you have too many debts, that too of huge amounts, and by no way can you ever pay them back, then Chapter 7 is what you should file.
But, if you have one or two good debts, like a mortgage and/or student loan, and you want to take care of these debts in some real good repayment process, then Chapter 13 bankruptcy is what you are looking for.
The best part of bankruptcy is that, your debts will start to get arranged as per their priority and importance.
Unsecured debts or consumer debts, like credit cards, medical bills, payday loans and so on, get the lowest priority. Their chances of being paid back in full is so thin, that creditors of such debts really get scared when they hear the debtor is planning to file bankruptcy!
Therefore, sit down with the lawyer of your preference, and know bankruptcy in detail. Providing all information about bankruptcy is surely not possible in a web post.
But, for your convenience, and for you to decide fast about what you should do regarding your credit card debt, I will be giving,

A step by step analysis of bankruptcy and debt settlement for credit card debt:

1. Bankruptcy may put a hole in your social reputation, but settlement has nothing to do with family and society.

2. For only credit card debt, it is highly impractical to file bankruptcy. No matter how much you owe on credit cards, you can definitely erase it with debt settlement.
Plus credit card debt settlement reduces your debts fast and you will be debt free in no time.
But bankruptcy can become a lengthy process, if you want to avoid chapter 7 and file chapter 13 (also called reorganization bankruptcy), which can take 4-5 years to complete.

3. Bankruptcy involves vigorous court sessions and proceedings. This might turn out to be a big hassle if you are not comfortable with court and law.
But debt settlement has no court process to deal with. The settlement agreement is between you and your creditor, and if you choose a settlement company, then only this company will be included and no one else.

4. Bankruptcy is your best option if you have multiple crucial debts to work upon. Like, say for example you have a mortgage, a car loan, numerous credit card debts, tax debts and so on.
But, as said earlier settlement can only be done with unsecured debts. Therefore, if you have only credit card debt then you might be happy with debt settlement.

5. Both bankruptcy and debt settlement will hurt your credit score to some extent. But, bankruptcy has many other issues related to honor, prestige and reputation.
Debt settlement will at least spare you from such complications and stigmas.

6. By filing chapter 7 bankruptcy, there is a probability of losing your valuable assets like home and other personal properties.
But, with debt settlement you have nothing to fear about anything as such.

7. Once you file bankruptcy, you are protected by the court, and no collectors or creditors can call or harass you about debts.
But settlement doesn’t have the power to ward away these people. Still if you are working with a settlement company then they might help you out, when collectors and creditors try to sue you.

However, don’t forget to consult a lawyer so as to figure out in more detail what debt relief option should you choose to eliminate credit card debt.
No matter what option you choose, your priority should be to save as much money as you can on your debt payments, and eliminate the debt as fast as you can.
The more a debt lingers, more will it grow on interests!

About the Author

Anthony W. Chauncey is highly qualified and dedicated in the areas of Bankruptcy, Foreclosure Defense, Criminal Defense, Traffic Citations, Family Law, and Personal Injury who can help you in your time of need.