Are you wondering which is better – to work out a credit card debt settlement or to file for bankruptcy but are not at all sure which is the right one for you then you need to take a few things into consideration before you make any decision which is right for you at this time. Perhaps it feels the right thing to do is to file for bankruptcy and leave all the hassles of nasty phone calls and demanding letters well behind, but lets look at some facts here.
So, you are in the position where you have been unable to pay off your credit card/s for quite a while now and its got to the stage where your card/s company have sold on your debt to a debt collection agency. Of course, the collection agency will contact you very soon as they want to get “their” money back and also profit too. They want immediate payment.
However, if not in the first instance, at least some way down the line, they will reduce the amount they are asking for, and very often it will be a very significant reduction of what was once the original debt. If you go ahead and pay, the debt collection agency will get, lets say, around 60% of the final payment you make, leaving just 40% of that for the original creditor/s.
However, when it does get to this stage in the affair, the debt collection agency will actually offer to accept a fair amount less than your actual debt currently stands at. So as an example let us say that the collection agency will receive, if you decide to pay them, a commission of 60% of the reduced debt offer. Following so far?
Although the card company is not going to receive anything near the initial amount owed to them this $3,200 is still more than they would attain in Chapter- bankruptcy. If you were to go for Chapter 7 bankruptcy they would receive absolutely nothing!
So at the end the card company will receive a total of $3,200, which although not nearly as much as you actually owe to them, is a more than they would receive in the case of a Chapter- bankruptcy. In a Chapter 7 though, they would not receive a cent!
But is this any clearer to you now than before? Probably not much. So, ask yourself this:
– how long does bankruptcy stay on your credit file?
Answer: 10 years
– how long does a settlement stay on your file?
Answer: 7 years
If you were to take the route of bankruptcy there are other fees to pay, namely:
– attorney fees
– a bankruptcy filing fee
– court fees
– a fee payable for a pre-filing debtor education course and you have to take the course too.
And if you were to default on the bankruptcy terms and conditions you would have to start again from the beginning, and would at the same time lose all that money paid towards the above costs. A high price to pay for no results!
Therefore, unless your debt is very much insurmountable, it most certainly makes very good sense to focus upon the debt settlement route.