5 Quick Comparisons of Debt Settlement and Bankruptcy

Nowadays it’s almost impossible to ignore the multitude of advertisements and information articles on both debt reduction services and bankruptcy. Although these two are entirely different concepts and often operate on two varying levels, debt settlement and bankruptcy seem to be always pitted against each other.

An average consumer may feel attracted to the “instant” relief that bankruptcy offers. People often hold the perception that bankruptcy simply means you “erase” your debts, start anew with a clean slate… you know, the works. What people don’t know (or sometimes choose to ignore) is that bankruptcy can have devastating effects on a person’s financial standing in the long-term.

The same goes with debt settlement, of course. The internet has seen a lot of heartbreaking stories about debtors who have tried generic debt reduction services offered to them by some shady company. Although there is quite a number of people who have benefited from the legal guidance and expert counsel of legitimate debt specialists, by not making an effort to know what effects or results should be expected, consumers seem to be digging their own financial grave.

To settle the score, here are 5 quick comparisons of bankruptcy and debt settlement programs:

1. Effect on your credit record and score.

The one major disadvantage of filing for bankruptcy is that it can stay on your credit record for up to ten years. Your credit score will also be dealt with a devastating blow, making you ineligible to acquire loans or credit accounts for a while. Debt settlement programs might show up on your record initially as a black mark but as you go on with the program, you should see an improvement on your credit score.

1. Long-term effects on your financial situation.

A record of bankruptcy on your account can affect decisions made by future potential employers, landlords, and creditors as they may see you as a high-risk candidate. On the other hand, the completion of debt settlement or debt reduction services means just that – you’ve completely settled all your liabilities.

1. Property losses.

Debt settlement does not require you to give up any of your properties. Bankruptcy takes most of your belongings with the exception of one house and tools that are integral to your trade.

1. Privacy.

Unless you make it public, your debt settlement arrangement with your creditor will remain private. Bankruptcies may be published on periodicals and journals.

1. Risk of fraud.

A lot of consumers who are not well-versed in the workings of the debt industry often opt for a third-party firm that provides debt reduction services. While some have had excellent experiences with reputable firms, news of debt reduction law center fraud still abound. As bankruptcies are handled by federal courts, the risk of becoming a victim of fraud is very low.