Back in 2005 there was a changeover in the bankruptcy laws. This reform changed the laws making it much more difficult for a consumer to file Chapter 7. A Chapter 7 will completely wipe the slate clean of the debts owed. If someone dosen't pass the "means test" to enroll for Chapter 7 then they must look to go through what's called a Chapter 13. With a Chapter 13 the court will examine your complete financial circumstance to come to a determination how much you will be forced to pay back towards your debts within the next five years.



As you can almost certainly tell a Chapter 13 for most is not as sweet of an offer as what a Chapter 7 is. This drives most debtors away from filing bankruptcy to look for other methods of credit card debt relief. One of the popular and more attractive methods then becomes credit card debt settlement.

This is a method in which one must fall past due on their credit cards while saving up the necessary cash on the side, to then negotiate a one time settlement, at a much lowered amount from the original balance owed. While debt settlement does have a short term harmful effect on someone's FICO credit rating, it is no where near as bad as bankruptcy. Settlement is not made a public record like bankruptcy.

A debtor can look forward to saving themselves roughly 50% of what the debt was at first. And look to have themselves become free of their debts within a matter of 2-3 years for some much sooner. Which makes credit card debt settlement a much more attractive offer than a Chapter 13 bankruptcy.

The truth is in many situations consumers will end up saving more money with debt settlement is almost reason enough. On top of the fact that the maximum it will take to be debt free is three years. When in comparison to a bankruptcy that will take five. Plus settlement is a private matter and not made a public record for the rest of your life, as with a bankruptcy. Then of course the issue of the credit report, debt settlement comes off as being a lot less negative than bankruptcy.

There are three ways that a debtor can settle the debts they owe. First off you can do it yourself, which is greatly advised against if you do not know what you are doing. If someone cant do it themselves then a debt settlement company can be hired to assist in settling someone's debts. There are many good debt settlement companies however one must due diligence on a company to make sure they are reputable and honest. Then you can contact a debt settlement lawyer as well. You can get more security retaining a law firm, and the majority of the time they can negotiate lower settlements as well. And being that lawyers must be accredited members of their States Bar Association you get the further protection in knowing that they must report to a higher authority. There are far less unethical organizations that are law firms then debt settlement companies.