Why Debt Settlement Instead of Filing Bankruptcy?

You can’t turn on the television these days without hearing about someone filing for bankruptcy or a debt settlement commercial. Today, it’s not surprising to hear about a friend or family member filing for bankruptcy. The US economy is stagnant and doesn’t look like it’s going to get any better any time soon. The White House recently reported how unemployment figures had fallen 8%, only to follow up a month later with an increase again to 8.2%. Although these numbers seem high, most experts say they are unrealistic. Many economic experts say unemployment is closer to 11% nationally. What is not being denounced is the people who have run out of unemployment and have stopped looking for work. This group is getting bigger and bigger and as time goes on we will see many of these people file for bankruptcy to get rid of creditors.

Let’s face it, America is broke. The government is spending $1.3 trillion a year more than it has taken in and appears to be reaching American consumers as well. The average American has about $16,000 in credit card debt, and when you consider that the average salary is only $36,000 a year, it’s hard to believe this debt will ever be paid off. Most of these people continue to pay the minimum payments and if they can keep up, they will ask to have their balance continually raised. It is only a matter of time before the wheels fall off of this type of lifestyle.

With so many people in debt and so few working, the bankruptcy and debt settlement industry has been booming. Lately, it seems that creditors would rather see a debtor in debt settlement than file for bankruptcy. It is understandable that they would rather get something than nothing. It makes you wonder if some of these debt settlement companies are backed by the credit industry. Since debt settlement is unregulated, there have been many unscrupulous characters who have banded together to make a few bucks. The disadvantage of using debt settlement instead of filing for bankruptcy is that the creditor is in control of the outcome. The creditor will dictate the payment schedule and what is required to succeed in settling the debt and if the debtor defaults, all bets are off.

This is why it is much better to file for Chapter 7 bankruptcy. A person who files for bankruptcy has the power of the bankruptcy court and the US legal system behind them. When a bankruptcy attorney files a bankruptcy petition, the automatic stay kicks in and stops creditors from all legal and collection activity against the debtor. The automatic stay is so powerful that it will stop foreclosures, lawsuits, judgments, and wage garnishments. No longer will the debtor have to worry about being bombarded with calls from nasty debt collectors threatening them. This is one of the reasons that pushes an individual over the edge to the point where he calls a bankruptcy attorney to file. They want their life back. It is true that no one really wants to file for bankruptcy, but sometimes it may not be the only option but the best option.