Should I file Chapter 7 or do a debt settlement?

Many consumers that are dealing with debt issues ask the question should I file a chapter 7 bankruptcy or do a debt settlement?  You probably read a ton of stuff on the internet saying you should file a Chapter 7 or you should do a debt settlement and not file a Chapter 7 case.   The reality is you got to decide what will work you and not what is said on the websites, facebook or google ads being issued to get you to go their way—debt settlement or Chapter 7.

Here are somethings you need to think about in making your decision:

  1. The amount of debt owed:  The amount of debt owed is a deciding factor on what to do.  The main deciding factor is that the cost to do debt settlement may just be too much. For example, if you owe nearly $20,000.00 in debt you will need at least $12,000.00 to settle your debt. Why so much money to settle? Because creditors will settle but they generally want 50 to 60% of the amount owed to settle the debt.  So, you need to look at the amount owed because even to pay less may mean you cannot afford to do a debt settlement.
  2. Credit Score Desires:  If you want a faster recovery of your credit score, you need to look to a Chapter 7 case rather than debt settlement. Why is a Chapter 7 case faster recovery to your credit score? You get a clean sweep of your credit when you get a discharge of all debt listed on your credit report.  Creditors due to the discharge must stop reporting anything negative against you.  However, if you settle debts, the creditors can still report the late payments which are continuing negative reporting which means that your credit score cannot improve.  Eventually, it does but not until a lot of time has passed.  Time it takes your credit score is important.
  3. Guarantee Outcome:  There is very little in this world that you can guarantee a outcome, especially in legal matters. Time is so critical for people too an if you are going to take time from other parts of your life to deal with debt you want to make sure it works.  Debt settlements can be successful but the issue regarding outcome is that each creditor settles debt differently and there is no official process that a creditor must follow.  So, you can get an outcome but you cannot guarantee an amount or a time it takes to get the outcome.  A Chapter 7 case, if you meet the requirements, you are guaranteed a time frame of about three months and guaranteed an outcome of total discharge of your debt owed with only paying a flat fee and filing fee that probably be around $2500.00 and maybe less like $500.00 up front and a monthly fee of like $200.00 a month if you get a third party funding source for your fees.

You have decide what you need to do for yourself.  However, these three things to consider are good ways to help you decide what you need to do.  Remember ads will push you one way or the other but in reality the three things to consider are really the guide to follow.  What works for you may not work for another person.   Either path is a good way to go, but they are different and do have different outcomes.  The one thing for sure is that if you have debt you need to deal with it as soon as you can to get your life back.