Debt Settlement vs. Bankruptcy

A recessed economy and bursting of the real estate bubble have pushed borrowers to the point where they can no longer keep up with payments on their credit cards and consumer debt. For those searching for solutions, the decision often comes down to choosing between a variety of debt relief options.

The options include debt counseling, debt consolidation, bankruptcy, and debt settlement. Of the four, debt settlement and filing bankruptcy have become the most popular of the solutions due to their advantages relating to decreasing current payments and the reductions in outstanding balances of debt.

For consumers, the two most common filings are chapters 7 and 13. Of the two, chapter 7 allows for much better outcomes for filers with steep reductions or outright dismissals of debt. Prior to the overhaul of the bankruptcy code in 2005 chapter 7’s were immensely popular for just that reason. Since the overhaul, the choice of which of the two chapters would be available to the consumer is decided by the court depending on the outcome of a means test which is the required first step in any bankruptcy filing. The means test is essentially an evaluation of the filer’s income and expenses which is then set against debt redemption standards as set by the IRS. Measured against the IRS standards, if the borrower falls short of income guidelines he can then file for bankruptcy under the auspices of chapter 7. The guidelines for qualifying for chapter 7, however, are stringent. If the means test reveals that a borrower can pay even one hundred dollars per month toward debt, the filing will automatically go toward a chapter 13 bankruptcy. In either situation, the borrowers are required to get credit counseling and budget analysis at their own expense.  
Chapter 13, while providing some relief on current payments, is not nearly as consumer friendly as chapter 7 and carries disadvantages that convince many borrowers that the option is just not for them.   The biggest disadvantage is that once the terms of the filing are set, a borrower’s finances can be overseen by a trustee of the court. The invasiveness of having an outsider involved in day to day or monthly budgeting becomes an immediate deal killer and typically turns the borrower toward debt settlement.  
Debt settlement, also known as debt negotiation, is a relatively new and aggressive form of debt relief offering many advantages over counseling, consolidation, and bankruptcy. The first and most immediate advantage is an approximate reduction of 50% on payments related to each account rolled into the debt settlement. Accounts which can be rolled into the settlement include credit cards, department store debt, unpaid utilities, medical bills, and other unsecured debt. Other advantages include:
* Being proactive in pursuing a debt settlement can prevent wage garnishments and attachments – Letting creditors know that you’re in a debt settlement process provides assurance they are going to be paid a least some of their money. Creditors are unlikely to initiate any legal action while a settlement is under way.
* Debt elimination – Outstanding balances can be reduced by 40 to 70%, depending on the creditor. On average, the collective accounts in a settlement will be reduced by 50%.
* Added security for secured assets - Reducing payments and eliminating a portion of unsecured debt relieves pressure on secured assets. Debt settlements, for example, are being combined with loan modifications to help homeowners reduce their total payments toward debt and improving the chances of getting approved for new mortgage terms.
* Complete payoff of debt balances – After the debt reduction, payoff schedules are flexible but generally last no longer than 48 months. The same accounts maintained with minimum payments could take over twenty five years to pay off.
* Faster improvement of credit scores - The settlement of accounts allows for borrowers to begin the process of re-building their credit scores faster than bankruptcy which can remain on a credit report for ten years and stay on the public record indefinitely.    
Debt settlement/negotiation is becoming increasing popular with struggling consumers because of its advantages over every other form of debt relief including bankruptcy. Consumers should still familiarize themselves with all forms of debt relief before making a decision. The best way to sort through the options is to work with an attorney with experience in all forms of debt relief to determine which will deliver the best outcome. Getting on the road to financial recovery is that simple.

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The debt settlement experts at USA debt have years of experience helping average people overcome their problems with debt.  Debt settlement is a way to create a plan to pay off your debt while negotiating with the lenders you owe money to.  Lenders may include credit card companies, banks, collections agencies, utility companies and more.  We can help you with your debt problems, including:

•    Credit Card Debt
•    Medical/Hospital Bills
•    Department Store Credit Cards
•    Oil/Gas Credit Cards
•    Personal Loans (unsecured)
•    Overdue Rent
•    Autos (Repos)s
•    Local Merchants
•    Past Due Utility Bills
•    And more!

How USA debt Can Help

We are your advocate, helping you, informing and guiding you through the debt settlement process.  With our assistance, you can:

•    Reduce your unsecured debt
•    Have an advocate deal with your creditors
•    Arrange one affordable monthly payment
•    Complete the program in 12-26 months

With our help, countless people have gotten completely free from their unsecured debt and managed to change the way they live their lives.  No longer fearful of collection agency phone calls or terrified of bills piling up, people are able to enjoy a high credit rating and financial freedom.

USA Debt Settlement Resource Center

We don’t just guide you through the process; we supply accurate, in-depth information so that you understand what it is you’re doing and the benefits.  Articles, blogs, news stories and information sources are all available at  We are your partner throughout the program, and we invest our time, knowledge, experience and resources into you so that you can become a debt free individual.

The debt settlement experts at have worked with countless people all across the country, walking them through our comprehensive debt settlement plan.
You can take advantage of the information, knowledge and debt settlement professionals at by simply calling filling out our contact form today!