If you are in a debt relief emergency, there are two options which are open for you. The first is the traditional method of bankruptcy filing and the next is the option of debt settlement which has outpaced the traditional method after the US economy has been hit by recession. But, “which one to select?” Does debt settlement or bankruptcy make more financial sense? Let us find out!

Bankruptcy: Once you file for bankruptcy, it is true that you don’t have to pay a single dollar to the creditors and you can eliminate your credit card debt in full. However, there are several problems that you will have to face. Once you file for bankruptcy, your credit score will go down and you will lose your credibility. The report of bankruptcy filing shows up on the credit history for a period of 7 years to 10 years and during this period, you will not be able to borrow any further money from any creditor even if you need it. On the other hand, the creditors lose their liquidity and they find it difficult to manage their own costs. This results in disequilibrium in their financial structure and they themselves head towards bankruptcy. If this happens, the economy is affected even more and the country’s economic structure rolls back further into recession causing even greater problems for the consumers. This definitely does not make any financial sense.

Debt settlement: Through debt settlement, you can eliminate up to 60% of your unsecured debt through negotiation. It is true that you will have to repay the remaining amount of the money to the creditor but it is far better because you will then be able to revive your credit score which initially goes down during the negotiation procedure because you stop paying the creditor. But once you repay the remaining amount, your credit history becomes clean. The creditors on the other hand can get back at least a part of their liquidity and manage a portion of their organizational costs. The loss that they incur is covered by the stimulus cash that the Federal govt. has pumped into the economy. This saves the economy from rolling back further into the recession. Thus debt settlement for debt relief emergency makes greater sense.