Consolidating debt versus bankruptcy
They know that you can always file for bankruptcy, which could eliminate their ability to collect anything from you.So, they are frequently willing to accept less than they are owed through debt settlement.A settlement is a deal you negotiate with creditors to pay less than the amount owed.Why would creditors want to settle your debts for less than you owe?Bankruptcy frees you from debt collection, but the headaches can linger for years.
Both also provide exemptions that allow you to keep certain assets, although exemption amounts vary by state.
Bankruptcy can offer the fastest path out of debt, but the long-term impact on your creditworthiness is severe.
A bankruptcy will stay on credit reports from seven to 10 years, which will greatly impede your ability to get a loan, receive a credit card or buy a home.
Personal bankruptcy usually does not erase child support, alimony, fines, taxes, and some student loan obligations.
Also, unless you have an acceptable plan to catch up on your debt under Chapter 13, bankruptcy usually does not allow you to keep property when your creditor has an unpaid mortgage or security lien on it. Department of Justice that supervises bankruptcy cases and trustees.In Chapter 13, the court approves a repayment plan that allows you to use your future income to pay off your debts during a three-to-five-year period, rather than surrender any property.