If you are in a dilemma about whether to file for bankruptcy or work out credit card debt settlement then you need to know a number of things to come to the final decision which is best for you.
It may seem obvious to file for bankruptcy and get all the hassle and misery over and done with but before you do lets analyse a few facts.
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?
- Lets imagine you owe $20,000 to your credit card debts.
- The debt collection agency is asking for a full payment of only $10,000 from you to fully settle the debt.
- The collection agency thus gets 60% of this = $6,000.
- The original creditor receives the remaining 40% = $4,000.
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
Further, if you are to discontinue with the plan at any stage your case will be dismissed and you will be right back at the beginning once again, having paid all those added fees, which you lose anyhow.
Thus it appears that unless your debt has now become entirely unmanageable – and I mean entirely out of control – you should always strongly consider a debt settlement plan before contemplating bankruptcy.
You can learn more about credit card help and about a debt consolidation program to suit your needs.