Is debt settlement like bankruptcy?

Debt settlement is entirely different than bankruptcy.  There are two types of bankruptcy, Chapter 7 and Chapter 13.  Chapter 7 bankruptcy basically erases your unsecured debt and lets you start over financially, although you will have a large black mark on your credit report.  Chapter 13 bankruptcy sets up a repayment plan that typically lasts 3-5 years, giving you time to repay your debts.  After this time period, any remaining unpaid debts are erased.  Debt settlement is similar to a Chapter 13 bankruptcy case in the sense that you will be paying back some of the debt that you owe over a certain amount of time.  However, unlike bankruptcy, your debt settlement does not stay on your records.  Record of a bankruptcy file can stay on your records for up to 10 years, as opposed to debt settlement which is not on your record at all.  Your record may indicate that you are in a debt management program and after all debts are paid off it may state “debt paid off in less than full amount” or “settled in full”, but it is definitely better for your credit.  To many creditors, it is favored when your credit states you are currently in a debt management program (DMP).

Debt settlement is different from Chapter 13 bankruptcy because in Chapter 13 bankruptcy, the court decides how much you can afford to pay and sets a budget for you.  In a debt settlement program, you are in control.  Each month, you set a budget for yourself and save what you can in your settlement account.  While it is best that you put as much money as possible into this account each month, you ultimately decide how much that will be.  When we have reached a settlement that you agree to, you control the payment that goes to your creditors.  

Debt settlement and bankruptcy are different in principle as well.  Debt settlement is a way to seek to overcome the burden of debt in an honorable and worthy manner.  Bankruptcy should only be used as a last resort, for those who have suffered a tragedy that has left them crippled financially.  Also, debt settlement does not carry the same stigma that it associated with bankruptcy.  If you are employed, are serious about getting out of debt, and have enough funds to pay your debts over time, we recommend that you pursue debt settlement rather than bankruptcy.  Bankruptcy is only to be used when you have no other options.