SOS Dettes a non-profit credit counseling agency. Visit their website for more information at http://www.sosdettes.ca/en/.

1. Debt Settlement vs.
Bankruptcy

2. It seems that more and more people are getting themselves into
financial distress from mounting debts and the inability to pay them
off. No one ever has the intention of taking out credit and then not
paying it off, but sometimes life situations or improper calculations
don’t give you a choice.
When this happens, many people seek out a solution that will help
get them back on their feet. There are many different products and
options to consider, two of which are debt settlement and
bankruptcy.

3. What Is Debt Settlement?
A debt settlement program is one of the ways that debtors try to
smooth out their financial issues. Basically, debt settlement is
where your creditors, or the companies you owe money to, agree
to receive less than the total amount owing and still consider the
account paid in full.
Typically, this negotiation is done by someone else on your behalf
and in some instances your overall debts may be reduced by up to
50 or 60 percent. As part of the process, you usually pay the debt
settlement company each month, and they deal with your creditors.

4. What Is Bankruptcy?
Bankruptcy is another option when it comes to dealing with
excessive debt that is usually considered a ‘last resort.’
Bankruptcy is a legal process that includes filing papers, claiming
you are insolvent and unable to pay your debts.
To file bankruptcy, you need the help of a bankruptcy trustee, and
once it takes effect all your unsecured debts are gone. Typically,
an individual can be discharged from the bankruptcy after nine
months.

5. Effects
Both bankruptcy and debt settlement will lower your credit score,
but in most cases bankruptcy will have a more lasting effect.
As you continue to make payments into a debt settlement program,
your credit score will improve and you’ll get back to a favourable
position sooner. With bankruptcy, future creditors can see that you
were bankrupt for several years afterward, which will often affect
your ability to get credit.

6. Debt Settlement Benefits
If you decide on debt settlement as the solution to your debt
problems, here are some of the benefits you can expect:
• You pay less to remove all of your debts
• You can still keep your home and vehicles
• Your debts will disappear much quicker
• Your credit score suffers less damage than with bankruptcy
• Your creditors will no longer contact you

7. Bankruptcy Benefits
Even though bankruptcy is usually avoided like the plague, it isn’t
completely without benefits. Here are a few of the more common
ones.
• Complete removal of all your unsecured debt
• Creditors will be ordered to stop harassing you
• You get a completely fresh start financially
• Money stresses are a thing of the past

8. What’s Best For Your Situation?
In the majority of cases, choosing between debt settlement and
bankruptcy comes down to what’s best for your situation. On the
surface, it might seem like debt settlement is the way to go, but that
isn’t always the case.
If you have the means to make payments and your accounts will be
settled in a decent amount of time then debt settlement may be the
way to go. However, if it seems like you’ll be free and clear sooner
by filing for bankruptcy then that may be the better option.

9. Proceed with Caution
If debt settlement ends up being your method of choice, it’s
important to proceed with caution. Some of the less reputable debt
settlement companies will demand large fees upfront, and then not
do their part in settling your accounts with creditors.
They may also require you to pay all of your payment money to
them in a such a way that isn’t conducive to clearing away your
accounts in the fastest way possible. Be sure to ask a lot of
questions and make sure they have a clear game plan before you
dive in.

10. References
SOS Dettes a non-profit credit counseling agency. Visit
their website for more information at
http://www.sosdettes.ca/en/.