Credit Card Debt Settlement Opposed To Bankruptcy In The United States - Which Is Best For You?
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.
It may seem obvious to file for bankruptcy and get all the hassle and misery over and done with but before you do lets analyse a few facts.
However, if not in the first instance, at least some way down the line, they will reduce the amount they are asking for, and very often it will be a very significant reduction of what was once the original debt. If you go ahead and pay, the debt collection agency will get, lets say, around 60% of the final payment you make, leaving just 40% of that for the original creditor/s.
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!
The credit card company will obviously receive a much-reduced amount to what is actually owed to them and the reason they are willing to accept this is that they compare this figure firstly to what they would get if you were to declare Chapter 13 bankruptcy - they would get less. If you were to declare Chapter 7 however, they would get absolutely nothing!
So you can in time end up paying far less than you would do otherwise via debt settlement. Anything else to think about? Yes, actually. If you are to take on bankruptcy this will remain on your credit file for a total of 10 years, affecting your credit for that period of time. If you were to take on debt settlement your file would be “tainted” for 7 years only.
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.
Click the link if you need information about a debt consolidation program. You can learn about low interest and 0% interest credit cards too.
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