Should I declare bankruptcy or seek to settle my debt?

Whether you should seek a debt settlement to repay your debts or file bankruptcy depends on if you have the ability to pay. Typically, if you employ a debt settlement option, you are negotiating with your creditors to pay them the money you owe. The problem with a debt settlement is that you have to have money. A creditor will usually want you to pay the balance—whether it’s the original amount or a lower one—in full or a number of payments. If you miss either one of those payments, the creditor can sue you. In other words, with a debt settlement you don’t have any legal protection.

However, filing personal bankruptcy provides you with an automatic stay. This means that your creditor can’t sue or garnish your wages. In addition, depending on the bankruptcy chapter you choose, it will give you more time to pay your creditor. For instance, chapter 13 lasts for three to five years and requires you to pay your creditor each month through a bankruptcy trustee. Chapter 7 is the second option. It doesn’t require you to pay a creditor back. Typically, your unsecured debts are wiped out. Therefore, in approximately six months you don’t have to worry about trying to pay off a debt settlement.

Debt settlement and bankruptcy is complicated. Therefore, you should speak with a bankruptcy lawyer about the option that is better for you and your finances.