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Should I Choose Debt Settlement or Bankruptcy? Weighing the Pros and Cons<\/a>
- Assessing If You Need Debt Relief<\/a><\/li>
- How Debt Settlement Plans Work<\/a><\/li>
- The Debt Settlement Process<\/a><\/li>
- Weighing the Pros of Debt Settlement<\/a>
  - Settlements Discharge Debt<\/a><\/li>
  - Avoiding Bankruptcy<\/a><\/li>
  - Paying Less Overall<\/a><\/li>
  - Closing Accounts Without Ongoing Payments<\/a><\/li>
  - Getting Immediate Collection Relief<\/a><\/li>
  - Preserving Assets<\/a><\/li><\/ul><\/li>
  - Factoring in Major Cons of Debt Settlement<\/a>
    - Paying Upfront Fees<\/a><\/li>
    - Severe Credit Damage<\/a><\/li>
    - Ongoing Interest and Penalties<\/a><\/li>
    - Potential Tax Liability<\/a><\/li>
    - Risk of Lawsuits & Bank Levies<\/a><\/li>
    - No Guarantees<\/a><\/li><\/ul><\/li>
    - How Bankruptcy Protection Works<\/a>
      - Claiming Protection Under the Bankruptcy Code<\/a><\/li>
      - Chapter 7 Bankruptcy<\/a><\/li>
      - Chapter 13 Bankruptcy<\/a><\/li><\/ul><\/li>
      - Weighing the Pros of Bankruptcy<\/a>
        Immediate Stop to Collections<\/a><\/li>
        Eliminating Unsecured Debt<\/a><\/li>
        Catching Up on Secured Debts<\/a><\/li>
        Discharging Tax Debt<\/a><\/li>
        Improved Credit Sooner<\/a><\/li>
        Lowered Stress and Emotions<\/a><\/li><\/ul><\/li>
        Factoring in Key Cons of Bankruptcy<\/a>
        High Attorney Fees<\/a><\/li>
        Humiliating Credit Damage<\/a><\/li>
        Loss of Collateral Assets<\/a><\/li>
        Complications for Reaffirming Secured Debts<\/a><\/li>
        Limitations to Filing Frequency<\/a><\/li><\/ul><\/li>
        Choosing Between Debt Settlement and Bankruptcy<\/a>
        Your Income and Asset Situation<\/a><\/li>
        Your Comfort With Collections and Lawsuits<\/a><\/li>
        Your Credit Needs and Goals<\/a><\/li>
        Your Emotions and Discipline<\/a><\/li><\/ul><\/li>
        Getting Additional Guidance<\/a><\/li>
        Conclusion: Weigh Carefully, Then Act Decisively<\/a><\/li>
        Frequently Asked Questions<\/a>
        Should I choose debt settlement or bankruptcy?<\/a><\/li>
        How much will debt settlement cost me?<\/a><\/li>
        Can bankruptcy eliminate tax debt?<\/a><\/li>
        Is debt settlement bad for your credit?<\/a><\/li>
        Does debt settlement avoid tax liability too?<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n
        <\/span>Should I Choose Debt Settlement or Bankruptcy? Weighing the Pros and Cons<\/strong><\/span><\/h1>\n $\"Debt$
        Debt Settlement or Bankruptcy<\/p><\/div>\n
        If debt feels crushing and overwhelming, you may be considering options like debt settlement or bankruptcy for relief. Both can eliminate or reduce balances you realistically cannot pay.<\/p>\n
        However, debt settlement and bankruptcy also impact your finances and credit for years. The choice has lasting pros and cons to weigh carefully.<\/a><\/p>\n
        <\/span>Assessing If You Need Debt Relief<\/strong><\/span><\/h2>\n
        Before weighing debt settlement vs bankruptcy, confirm you rigorously tried easier options without success. Steps like budgeting, calling creditors for relief, or consolidating debt often provide some breathing room.<\/p>\n
        Consider settlement or bankruptcy more seriously after exhausting steps like:<\/p>\n
        \n
        Creating a budget<\/strong>\u00a0to direct more money toward debt<\/li>\n
        Contacting creditors<\/strong>\u00a0to lower interest rates or create affordable payment plans<\/li>\n
        Consolidating debts<\/strong>\u00a0into a lower payment through lending<\/li>\n
        Trying debt management<\/strong>\u00a0with a credit counseling agency<\/li>\n<\/ul>\n
        If your financial hole still feels too deep, debt settlement or bankruptcy may be the lifeline needed.<\/p>\n
        <\/span>How Debt Settlement Plans Work<\/strong><\/span><\/h2>\nDebt settlement,<\/a> also called debt arbitration or debt negotiation, is an agreement between a consumer and creditor to settle a debt for less than the balance owed.<\/p>\n
        For example, if you owe $10,000 on a credit card, the card company may agree to accept a $4,000 lump sum as payment in full. The remaining $6,000 balance gets waived.<\/p>\n
        Debt settlement pros<\/strong> revolve around eliminating debt while avoiding bankruptcy. However, steep settlement cons<\/strong> exist too.<\/p>\n
        <\/span>The Debt Settlement Process<\/strong><\/span><\/h2>\n
        The debt settlement process typically works as follows:<\/p>