Why Bankruptcy Isn't A Better Option For Most Consumers

Many things can bring a consumer to the point of bankruptcy: job losses, health crises and divorces can all be found at the root of many individual bankruptcies, but even stable, two-earner households declare bankruptcy. Today, more individuals and families are choosing debt settlement over bankruptcy as their first choice in debt relief.

On paper, bankruptcy seems like a great option for consumers who owe far more than they make, or can reasonably repay. In reality, declaring bankruptcy isn't as easy as it once was, and there's a long, painful recovery period following bankruptcy. Laws in the US regarding consumer bankruptcies have changed, and have made it more difficult for the average consumer to throw in the towel.

While it may seem like a nice idea, a more satisfying approach to debt relief for both the creditor and debtor is debt settlement. Debt settlement is frequently the least expensive option for both the creditor and the debtor. Creditors can often be flexible about interest terms of a consumer credit agreement as well as the balance owed, and would rather accept renegotiated terms than spend hundreds or thousands of dollars trying to collect debts, risk a complete discharge of the balance owed, or accept a significantly reduced payment from a collection agency that buys uncollected debts.

Debt settlement also enables consumers to avoid losing their possessions. In bankruptcy, personal possessions are often seized as part of the settlement process. Debt settlement provides the creditor with repayment (which is what the creditor really wants) and increases the likelihood that the debtor will satisfy his or her outstanding debt, often in a short period of time, allowing for a faster recovery from any negative marks that may have been placed on the consumer's credit report.