Debt Settlement Versus Bankruptcy - Which is Better?
Many people are now faced with problems on how to settle their credit card debts and avoid bankruptcy. But sometimes, the best option is to declare bankruptcy to prevent further damage to your finances. That said, declaring bankruptcy also has its downsides.
Choosing between debt settlement and declaring bankruptcy is a hard choice for people who are in debt with huge amounts to the names. Of course, both options will help you build up financially. But still, either move could be a quick fix, or a long road to financial freedom.
The first thing you need to do is assess your current financial situation. This can be done by evaluating how much you really bring home from all your sources of income. That includes paychecks, bonuses, and investment returns to name a few. You then have to see how much remains of your income after you meet essential expenses such food, clothing, electricity and groceries.
If your finances can no longer keep up with your debts and can barely meet your essential expenses, you can opt to have your credit settled via debt settlement or you can file for bankruptcy. Either way can help you solve your credit card problems. But like mentioned earlier, each has its downsides.
If you opt to end your debts by bankruptcy, here are some things you need to know. A bankruptcy can hurt your credit score by 200-250 points. That wholly depends upon the other negative remarks you have on your credit report. And get this; those remarks will remain there for a period of 7-10 years.
Basically, it would be hard for you to rebuild financially without a good credit line if you have a declaration of bankruptcy on your financial profile. Lenders and other financial agencies won't be so eager to provide you funds when you need them and credit card companies won't be so eager to issue you credit cards anytime soon.
Debt settlement, on the other hand, provides several options for you to clear your debts. You can either go for a loan modification or credit card debt consolidation. While most companies who offer such options require a huge lump sum for it to work, what comes with the agreement is usually an easy and more affordable payment scheme that will fit your financial standing.
With all that said, declaring bankruptcy should be done as a last resort. It is imperative that you explore your options in the credit card debt settlement area before you file for bankruptcy.
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