Debt settlement and bankruptcy address to the same problem debt.
A consumer needs to weigh the pros and cons of both these methods carefully before deciding on how to tackle the debt.
Both these methods help the debtor wipe clean their unsecured debts.
The point is when to to choose which option? In order to decide on a method a consumer needs to analyse his current financial status.
This means the consumer should know how much he owes in debts and exactly how much he needs to spend every month in order to meet his monthly expenses.
The remaining amount he can use to pay off his debt.
In case the debtor is exhausting all his income on his monthly expenses and nothing is left to pay off his debts then he ought to go for bankruptcy.
However, if the debtor is able to save some money after meeting his monthly expense then he should meet with his creditors to settle his account.
Both these methods reflect badly on the credit report however, the bankruptcy would stay on the report for at least 10 years and a settlement shows up for 7 years.
With settlement it is possible to negotiate with the debtor to remove the note from the report after some payment.
Bankruptcy requires a customer to hire a lawyer as the procedure involved is complicated and requires an expert's assistance.
This increases the cost of this relief program as hiring a lawyer is expensive.
Settlement however is a simple process which can be negotiated by the debtor himself.
The process of bankruptcy involves liquidating one's assets in order to cover as much payment to the creditors.
In settlement process one's assets are not touched.
Any debtor can avail settlement if he has at least ten thousand dollars in unsecured debt.