Debt settlement – Is it an alternative option to bankruptcy?

When you’re knee deep in credit card debt, you must be thinking about filing bankruptcy to give yourself a fresh new start. Have you thought about the hassles that you may have to face if you file bankruptcy? If answered no, it’s high time that you reconsider your decision so that you don’t fall in a mess in the long run and be turned down while making any kind of loan application. There are some alternatives to bankruptcy but the most worthy one is debt settlement. You can easily waive off a portion of your debt balance and then stand debt free in the future.

Debt settlement

Read on to know why debt settlement is considered as a worthy alternative to bankruptcy.

What actually is the debt settlement process?

When you enroll yourself with a debt settlement plan, the debt consultant will negotiate with your creditors on your behalf and attempt to reduce the principal balance that you owe. They will use the best negotiation techniques that they’re able to and try their best to reduce the amount that you owe. Once they agree to this payment schedule, you just have to make a single monthly payment to the debt settlement plan and this will be later on disbursed off to your creditors in due course of time.

Effect of debt settlement and bankruptcy on your credit score

Both debt settlement and bankruptcy has a bad impact on your credit score but the extent is less in case of a debt settlement as you end up repaying a certain amount of money unlike bankruptcy. It is said that debt settlement lowers your point by 125 points and bankruptcy stays on your credit report for the next 7-10 years. Therefore, after a bankruptcy, you cannot receive new lines of credit within favorable rates that are within your budget. Though there are ways in which you can boost your credit score after both a debt settlement and a bankruptcy, the ways are certainly less harsh in case of a settlement.

If you have to choice of reducing your debts through a debt settlement company, always choose this option so that you can get loans at an affordable rate in the future. Before choosing a debt settlement company, just make sure that the company is a trustworthy one so that they don’t deceive you into paying upfront fees or any kind of other charges before even settling your credit card debt. As a debtor, you just have to remain extra watchful so that you don’t fall in trouble due to your ignorance.

Denny Jones

Hi, I'm Denny Jones, a seasoned financial advisor and writer passionate about helping others conquer debt and achieve financial stability. With over a decade in the industry, I've guided countless individuals toward smarter financial decisions through practical advice and insightful writing. Join me as we navigate the path to financial freedom together.

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