Debt Settlement Vs. Bankruptcy: Which is Best?

Which One is Right For You?

Facing bankruptcy can be intimidating, but the decision of whether to file bankruptcy or debt settlement doesn’t have to be. In order to determine what the best choice will be for you, you first have to understand what debt settlement and bankruptcy are, and the distinctions between the types of each.

Long-Term Debt Settlement

As the least successful option with a mere 10% success rate nationwide, long-term debt settlement keeps you under the control of your creditors for 24-48 months. This leaves plenty of time for your creditors to sue you for what you owe. After completing the debt settlement program, you should regain new credit within another 24 months. This can keep you trapped by your debt for up to six years. The fee for this type of debt settlement is around 20% of what you owe. Most people are unable to settle all their debts this way because they have no idea how much the total cost will be until they complete the process. With no way to plan and creditors breathing down your neck, long-term debt settlement can put you in more trouble than you started with.

Chapter 13 Bankruptcy

If you decide to file for bankruptcy, you first have to choose which type you would like to file for. As long as you successfully complete Chapter 13 bankruptcy, you can be debt free in 3-5 years with no possibility of being sued or having interest and fees added. As in debt settlement, you will typically regain credit after 24 months of completion. Chapter 13 bankruptcy involves making a repayment plan and paying it out over 3-5 years. This, like debt settlement, keeps you in debt for a long period of time. It is also expensive, with prices ranging from $2,000-$3,500. Like debt settlement, the success rate is also low, with only around 20%-40% of people able to completely discharge their debts. Many who do not succeed with Chapter 13 bankruptcy end up filing for Chapter 7 bankruptcy.

Chapter 7 Bankruptcy

As the quickest traditional form of resolving debts, Chapter 7 bankruptcy discharges debts within 90 days of filing. Because of the short-term results, it is also the most successful. Those who file for Chapter 7 bankruptcy are able to discharge all their debts without running out of money or being sued. The fee is also cheaper than other options, ranging from $500-$1,500. You still have to wait 24 months to regain credit, but you can get back on your feet much quicker. Chapter 7 bankruptcy does not settle your debts but rather discharges all qualifying debts, leaving you debt-free with only your credit score to worry about. Although this may seem like a good option, bankruptcy is still bankruptcy, and risks are still involved.

Alternatives to Filing

You may think these are your only options for debt, but that’s where we come in! At Shaw Defense, we offer alternatives to both debt settlement and bankruptcy. If you would like to learn more about our methods, give us a call today. Not in Texas, or the US for that matter, and looking to challenge a credit? Look for a no-fee attorney who can represent your case.

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