May 6, 2021

Discover the difference: Bankruptcy vs. Debt Settlement

When overwhelming debt faces you, you have two different options from which to choose to help alleviate your financial distress: debt settlement and bankruptcy. Filing for Bankruptcy or debt relief options often seems like a last resort; in reality, they’re not; they give you control of your financial situation. Each offers distinct advantages and disadvantages, so it is vital to know the details of both before making a decision that will affect your financial future.

Our team at The Law Offices of Michael A. Siddons are experts in bankruptcy law and can help you take control of your debt through settlement or help you file for bankruptcy.

Choosing Bankruptcy or Debt Settlement

Neither bankruptcy nor debt settlement is an option that’s easy to swallow. Still, choosing between the two may be the only option for relief for those in significant financial distress. Bankruptcy offers a fast path out of debt but hurts your credit for up to 10 years, severely limiting your ability to buy a home, take out a credit card, or get a loan. Debt consolidation does not require a lawyer and a court filing but can open you up to debt collections and lawsuits from creditors.

Pros and Cons of Bankruptcy

Bankruptcy is an option for those who have exhausted all possibilities of debt relief. It is a good option for those at risk of losing their homes, who have lost their jobs, or where making debt payments would cause them to dip into their retirement savings.

Pros of Chapter 7 bankruptcy and Chapter 13 bankruptcy:

●      It offers a fresh financial start

●      It only takes six to eight months

●      It does not require you to pay taxes on unpaid debts

Cons of Chapter 7 bankruptcy and Chapter 13 bankruptcy:

●      It damages your credit score for ten years

●      It can cause the loss of your house and other properties in some states

For more information on filing for bankruptcy in Maryland, you can visit the Maryland State Bar Associations’ “Should I File For Bankruptcy?” page.

Pros and Cons of Debt Settlement

Debt settlement is a good option for those with the financial stability to pay off a settlement while still paying their mortgage and other bills—and if creditors agree to reduce debt in favor of a lump-sum payment.

Pros of debt settlement:

●      It requires that you only pay part of what you owe

●      Using a debt settlement company saves the hassle of dealing with the time and expense of bankruptcy

●      It gives you free access to credit counseling to help you create a debt settlement plan

Cons of a debt settlement:

●      Creditors may not be willing to negotiate with you

●      Debt collectors will not stop calling until the debt is settled

●      Debt settlement companies often charge high fees for their services

Get Advice on Bankruptcy vs. Debt Settlement

If you are looking for a fresh start and need legal advice on filing bankruptcy or if a debt settlement program is the right option for you, give our Pennsylvania bankruptcy attorney a call today at (610) 255-7500. We can get your financial future back on track & assist you in taking control of your personal finances by helping you file for bankruptcy or coming up with a repayment plan as part of a debt settlement. We have experience offering Zero down Chapter 7 bankruptcyChapter 13 bankruptcy, and other bankruptcy processes.