Bankruptcy Or Credit Card Debt Settlement – Which Is It?

Are you wondering which is better – to work out a credit card debt settlement or to file for bankruptcy but are not at all sure which is the right one for you then you need to take a few things into consideration before you make any decision which is right for you at this time. Perhaps it feels the right thing to do is to file for bankruptcy and leave all the hassles of nasty phone calls and demanding letters well behind, but lets look at some facts here.

So, you are in the position where you have been unable to pay off your credit card/s for quite a while now and its got to the stage where your card/s company have sold on your debt to a debt collection agency. Of course, the collection agency will contact you very soon as they want to get “their” money back and also profit too. They want immediate payment.

Yes that’s a fact, they want their money and they want it now, but what you will tend to find is that the amount they want is a much-reduced amount to the actual balance of the debt. You may not find that initially this is the case however, but in time they will try to negotiate with you upon the payment. If you do go ahead and pay them then the debt collection agency will receive – lets say around 60% of this amount as a commission, and the lending company will then receive the final 40% – a much reduced amount to what is actually owed to them.

Lets look at some figures to make this more clear.

The original amount you owe is $16,000.

As a full payment the debt collector is willing to accept $8,000.

The debt collector gets 60% of this amount = $4,800.

The card company will thus get 40% = $3,200.

Although the card company is not going to receive anything near the initial amount owed to them this $3,200 is still more than they would attain in Chapter 13 bankruptcy. If you were to go for Chapter 7 bankruptcy they would receive absolutely nothing!

Furthermore, if you were to take the bankruptcy option this would stay on your credit file for a total of 10 years.

If you were to take the debt settlement option then it will remain on your file for 7 years in total before you can start afresh.

By taking the bankruptcy route you also have to pay other fees such as the following:
- filing fee
- attorney fees
- court fees
- pre-filing debtor education course fee (and you have to sit the exam too)

Further, if you are to discontinue with the plan at any stage your case will be dismissed and you will be right back at the beginning once again, having paid all those added fees, which you lose anyhow.

Therefore, unless your debt is very much insurmountable, it most certainly makes very good sense to focus upon the debt settlement route.

Learn more about credit card help and debt consolidation program to suit your needs.

Article Source:http://www.articlesbase.com/debt-consolidation-articles/bankruptcy-or-credit-card-debt-settlement-which-is-it-1395648.html