Those who praise bankruptcy and who opine that it is a better option as compared to debt settlement clearly seem to be living in the pre 2005 era. 2005 was a very significant one as far as bankruptcy laws were concerned. It was in this year that U.S. Congress made sweeping changes to the law.
The basic purport of the amendment was to encourage people to opt for Chapter 13 bankruptcy instead of Chapter 7 bankruptcy. Chapter 7 refers to the popular notion of bankruptcy where all your debts are waived and forgiven in exchange of liquidation of all your assets except for certain exempted assets.
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That is to say, that court shall take over all assets and sell the same, utilize the money to repay your debts proportionately and free you of your obligation to repay any further debt. On the other hand, chapter thirteen involves intervention of the court to facilitate a repayment plan that ensures maximum repayment with minimum inconvenience to the borrower. It is not the traditional bankruptcy that we know about.
Now, what does debt settlement do? Settlement is nothing but an agreement where the lender agrees to waive close to fifty to seventy percent of the original amount owed in exchange of which the borrower promises to repay the remaining amount properly.
If you can secure a settlement on your own without relying on a settlement company, you would actually be saving money that otherwise would have been paid as court fees and attorney charges in bankruptcy.
Even if you make use of a settlement company, you still would have saved your prestige and status in society. Nothing seems worse on your credit history than a bankruptcy declared many years ago. Why voluntarily get this stigma on your credit history? Why not opt for better solutions instead?
As far as the merits of these two financial options are concerned, it does not take a rocket scientist to conclude bankruptcy involves acceptance of financial irresponsibility in front of the entire world. On the other hand, settlement can be achieved with a discreet meeting with your creditors that nobody needs to know about.
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