You are having difficulties coming to terms with your lack of finances. On the one hand, you feel that you can resolve the debt you have. On the other hand, there is no end in sight, and you keep falling deeper and deeper.

You must decide. Do you go with a debt settlement agency? Or do you bite the bullet and take on a bankruptcy? Debt settlement does not seem as bad as bankruptcy, but is it?

Debt settlement

A debt settlement company negotiates with a creditor to accept a lesser amount than what you owe. Once a settlement is in place, the creditor may not continue to contact you for the money. There is information that you may need to be aware if you decide to use debt settlement, including the following:

  • Only unsecured debt, such as credit cards, qualifies.
  • You can keep assets like your house and car.
  • Creditors continue contacting you until settlement.
  • You may be able to get out of debt faster.
  • Debt settlement stays on credit report for seven years.
  • The process may take two to four years.

During the process, you may have to set up a separate account and deposit monthly payments. The debt settlement company uses this account to make payments to your creditors. Another downside to debt settlement is the possibility that a creditor will refuse to settle the debt.


The word “bankruptcy” implies the embarrassment and humiliation that you cannot handle your finances. However, like debt settlement, you may need to consider certain aspects of bankruptcy, such as:

  • Secured and unsecured debt
  • Stays on credit report for seven to 10 years
  • Depending on the type of bankruptcy process can take from three months to five years
  • Lawyers may be expensive
  • Chapter 13 you can keep your assets
  • Chapter 7 you may have to give up your assets

There are pros and cons, no matter the type of debt relief you choose. The result is that you may be able to settle your debts and have the chance to start over.