In the last decade there have been major changes in the bankruptcy law. These changes have made it difficult for an individual to become eligible for bankruptcy under chapter 7. This is one of the main reasons why bankruptcy has lost popularity amongst people seeking debt relief. Another reason is that debt settlement has presented itself as a more affordable and easier way of getting out of debt. Any debtor with more than ten thousand dollars in unsecured debt can be eligible for the settlement program. Hence this makes it more approachable for most of the debtors seeking relief.
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A debtor must first analyse his financial conditions before he can choose between the two options. If the monthly income is used up by the monthly expenditure then the customer should file for bankruptcy. However, if he is being able to save up some part of his income to pay off his debt then debt settlement will be a more suitable option for him.
Apart from the eligibility criteria there are other reasons why people keep bankruptcy as their last option. Filing for bankruptcy is a complicated process which involves a lot of documents and a mandatory assistance of a lawyer. Lawyers come costly hence it adds to the expense of the individual. Settlement on the other hand is a straight forward process which can be negotiated by the debtor himself. The paper work involved is also not elaborate.
Bankruptcy remains on a customer's credit report for at least 10 years and majorly affects the credit score. A settlement process also has a negative impact on the credit rating however it is not as bad as bankruptcy.
A good negotiation can get a debtor a reduction of almost 40 % to 60 % of the total debt.
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