Is Bankruptcy Cheaper Than Debt Settlement?

Ever since the financial meltdown back in 2008 Americans continue to struggle to make ends meet. Even when it comes to budgeting for debt elimination, whether it be filing bankruptcy or debt settlement cost is a factor. One question that many ask online is, “Is Bankruptcy cheaper than debt settlement?” This certainly is an understandable question. When someone is living paycheck to paycheck, robbing Peter to pay Paul they have to count their nickels to get by each month. The answer to that question lies heavily on the amount of debt one wants to eliminate. If someone has $5000 in debt, debt settlement would probably be their best option as it typically settles for about 50% of the balance. This means the debtor would have to come up with $2500 to settle this credit account. If someone has $50,000 in credit card debt, to settle the debt they would have to save up approximately $25,000 plus fees to settle those accounts. On the other hand, the individual with $50,000 in debt could file a Chapter 7 bankruptcy as long as they qualify and pay approximately $400 in court fees and a couple thousand dollars to a bankruptcy attorney to wipe out the entire balance with the bankruptcy discharge.

Looking at the scenarios above, it’s easy to see that filing bankruptcy is probably cheaper than debt settlement. The problem is, when someone doesn’t want a bankruptcy filing on their credit report or their pride wants them to pay back as much as possible on their debts, debt settlement might be the way out. The third option for individuals that want to pay back a portion of their bills yet retain all their property, is filing a Chapter 13 bankruptcy. A Chapter 13 bankruptcy is a little more costly than filing Chapter 7 because the process is a lot more labor intensive for the bankruptcy attorney. The debtor and the bankruptcy attorney will have to submit a feasible repayment plan that will last 3 to 5 years to the bankruptcy court. All the individual’s debts are paid by priority with secured getting paid first and unsecured getting a minimal amount. In many cases, Chapter 13 will allow the individual to save face and partially pay back their debts while negotiating the balances down.

Getting answers to those tough bankruptcy questions needs to be thought of before you make a decision when it comes to your financial problems. Finding the answers to help you understand your situation more clearly can help you make an informed decision about filing bankruptcy. Take a minute to call or fill out the form to have a FREE NO OBLIGATION CONSULTATION with a bankruptcy attorney in your area.