Is debt settlement a better option than filing for bankruptcy? Well, the answer to this question depends on the individual circumstances of the debtor. Bankruptcy is the last resort to get out of debt. Due to the reforms in 2005, Bankruptcy Code now carries more stringent tests for a debtor before letting him through to a bankruptcy filing. Under debt settlement, debtors have the flexibility to operate on their own or through a debt settlement Company to obtain a better discount on their debts. We shall now analyze why debt settlement is a better option than filing for bankruptcy for a debtor who can support the debt to a certain extent.
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Bankruptcy Code now has more stringent guidelines which weigh the position of the debtor before letting him file for bankruptcy. Only those who are eligible can go ahead with the filing. For instance, to qualify for a Chapter 13 filing, the borrowers need to comply with requirements such as the required debt limits, repayment capacity and a permanent source of income. For a Chapter 7 bankruptcy, requirements are much more stringent. Therefore, you will not be allowed to file for bankruptcy cover unless you are in a very tight financial position. On the other hand, you also have to get legal advice from an attorney as to how you could proceed with the filing. All these obstacles make it more difficult to file for bankruptcy.
When looking at debt settlement, we do not see so many regulations that restrict the debtor. This means we have the freedom to choose the settlement Company or the settlement program we want. An additional advantage of the process is that it can be carried out by the debtor himself. This minimizes the cash outflow as the commission charged by the settlement Company will also be saved. However, due to the technical nature of the negotiation process, it is highly recommended that you obtain proper credit counseling or debt settlement help before opting for the settlement process.
The settlement Companies, in particular, carry the necessary expertise to offer a great service to the borrower. They can make sure that an affordable repayment plan is in place for the residual debt once a substantial haircut on the original debt is received.
Therefore, when determining the more suitable option, the financial situation of the borrower needs to be evaluated carefully. For a borrower who is in a position to service his debt in some way needs to resort to debt settlement which is the better option.
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