Are you considering bankruptcy versus debt settlement?  Bankruptcy and debt settlement are two possible options if you’re facing mounting debt, and claims from creditors.  Let’s look at some of the pros and cons when choosing between bankruptcy and debt settlement.

When considering your options, the first step is to determine whether you can pay down your debts with your current income.  If you can pay down your debts with your current income (or increase your current income), then debt settlement may be the best solution for you.  Next, you will need to determine whether you qualify for debt settlement.  To qualify for debt settlement, you will usually need to have at least $7,000 in unsecured debt.  It’s very important to ask each debt settlement company that you talk to about the minimum debt balance requirements.  Some companies have higher minimum requirements than others.

Choose debt settlement companies that have a strong history of negotiating with creditors.  Ask for references, and compare the services that each company offers. Check the company’s ratings with the Better Business Bureau.  Avoid debt settlement companies with negative ratings and lots of complaints.  If you decide to move forward with debt settlement, be prepared for the potential negatives.  Some potential negatives include: increased creditor phone calls, damaged credit, and possible collection lawsuits from creditors.  If you can’t handle these possibilities, then debt settlement probably isn’t the best choice for you.  Similarly, if you can’t pay off your current debt with your current income, then bankruptcy may be a better choice for you.

When considering bankruptcy, determine whether it will resolve your credit problems.  Depending on the amount and type of debt you have, a bankruptcy won’t always erase your responsibility to pay creditors.  From a cost standpoint, bankruptcy is usually more expensive than debt settlement.  And of course, bankruptcy is the darkest mark you can have on your credit score.  Compared to bankruptcy, debt settlement doesn’t affect your score to the same extent.  Talk with your attorney to determine whether bankruptcy or debt settlement is the right solution for you.