Bankruptcy and debt negotiation are two of the most popular debt relief options but these two couldn't be more different from each other. There are pros and cons for each option but a quick comparison will show you which one is the best for your situation.
Let's start with bankruptcy and see why consumers used it to get debt relief. Bankruptcy can be used to clear your debt in full and this is what made so appealing to consumers. On the other hand, clearing the whole amount of debt and giving nothing back to the creditors left a big financial hole in the economy as many consumers abused bankruptcy. The government needed to make a change and so bankruptcy changed in a great way due to new laws. Now, it is hard to be declared bankrupt and a lot more expensive. A lawyer is needed to represent you in court while you show a lot of paperwork to prove that you cannot pay back your debt. This can be very stressful but the biggest disadvantage is that it will ruin your credit score thus making it difficult for you to get another loan in the next ten years.
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Debt negotiation is a bit different and unlike bankruptcy, it works by talking to the creditor and reaching a mutual agreement. As the name states, some negotiations are done until both parts agree with an amount that the debtor can pay and is not a big loss for the creditor. These negotiations are sometimes done by the individual but the best way to do it is with the help of a debt settlement company that is specialized with such things; they know what to say and how to persuade the creditors into accepting a good deal. The fees that a debt settlement company asks for is affordable and it is only needed after the debt is settled. Debt negotiation can result in a reduction of 40% to 70% and the rest of the amount can be paid in the next couple of years and at lower interest rates.
There are different ways to get debt relief and make sure you do some research about each option before choosing one.
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