Debt Relief: Settlement vs. Bankruptcy

Debt Relief: Settlement vs. Bankruptcy

Debt can be an incredibly heavy burden to carry, and many relief options aren’t able to reduce the actual debt that a borrower owes. The customized debt settlement programs offered through Accredited Debt Relief can eliminate a portion of your debt, but so can bankruptcy – which option is best for you?

While there isn’t a “one-size-fits-all” solution to debt, there are a few key factors that you can consider to help guide you in the right direction. In this article, we’ll compare bankruptcy and debt settlement at a higher level to help you evaluate your options.

Upfront Costs

All bankruptcy filers, no matter the type of bankruptcy you pursue, are required to pay a filing fee. U.S. courts are required to charge $335 in fees for Chapter 7 filings and $310 in fees for Chapter 13 filings. 

Upfront Fees Settlement vs. Bankruptcy

Accredited Debt Relief’s debt settlement programs come with no upfront fee to enroll. Their team doesn’t earn a penny unless they are able to successfully settle your debt for less than what you originally owed. 

Court Filings and Lawyers

The other expense that you’ll be responsible for is the cost of a bankruptcy lawyer. While you can file for bankruptcy without an attorney, which is referred to as filing pro se, it requires extensive research and can be incredibly difficult to do depending on the complexity of your case. Due to bankruptcy’s financial and legal repercussions, the Administrative Office of the U.S. Courts highly recommends seeking the advice of a qualified attorney.

While there is indeed value in hiring a bankruptcy lawyer rather than filing pro se, attorney fees are still expensive and can vary greatly depending on your location. The national averages are $1250 for Chapter 7 filings and $3000 for Chapter 13 filings.

Settlement vs. Bankruptcy Lawyer Fees

Fortunately for debt settlement programs, you can participate in one without a lawyer. You’ll instead receive guidance and assistance from Debt Relief Specialists, who will negotiate with your creditors on your behalf to reduce the total amount you owe.

Time Investment and Credit Impact

The length of a bankruptcy case, from filing to receiving your bankruptcy discharge, can vary. Most Chapter 7 cases are completed in four to six months, and most Chapter 13 cases take three or five years.

The time it takes to complete a debt settlement program can also vary. Most debt settlement clients are able to complete their customized programs in 12 to 48 months.

Even though your time working with the court may be over, your bankruptcy typically sticks around on your credit report. Chapter 13 bankruptcy can remain on your credit report for up to seven years, and Chapter 7 bankruptcy can remain on your credit report for up to 10 years. This is generally considered to be a bad sign for creditors, and can greatly affect your ability to apply for credit in the future.

It’s also common to see a drop in your credit score when participating in a debt settlement program. As each enrolled debt is settled and your debt-to-income ratio improves, you’ll likely see your score improve over time.

Public Record

Bankruptcy filings become part of the public record, and are listed on the Public Access to Court Electronic Records (PACER) database. While your bankruptcy will likely not be headlining news, parties that you owe money to will be informed. This means that your landlord, child support recipients and debt co-signers will eventually know about your bankruptcy filing. Your employer will also find out about your bankruptcy if you file for Chapter 13 bankruptcy and wage garnishment is part of your repayment plan.

Enrolling in a debt settlement program is much more discrete, and it won’t show up in public records. Your creditors may report your debt’s status to credit bureaus as being settled, but this isn’t broadcast to the general public.

Guidance From Debt Specialists

Those who are seeking bankruptcy may be required to participate in pre-bankruptcy credit counseling before they file. You may also have to complete a pre-discharge debtor education course before any of your debts are discharged. Both are one to two hour conversations that happen over the phone, and they generally come with a $50 to $100 fee.

Settlement vs. Bankruptcy Guidance from Specialist Fees

When you enroll in a debt settlement program through Accredited Debt Relief, you’ll receive customized help from Debt Relief Specialists throughout the course of your program. We’re happy to answer questions and provide you with assistance seven days a week! You’ll also gain access to financial resources through your program’s Client Portal, which will help you as you work through your program and prepare for your program graduation.

Comparison Chart - Accredited Debt Relief vs. Bankruptcy

The Best Choice for You

The best option for someone else might not be the right option for you. It’s important to research thoroughly before pursuing any debt relief program. Fortunately, Accredited Debt Relief provides risk-free consultations to help guide you in the right direction. Whether or not debt settlement or bankruptcy are the best fit for you to reach your financial goals, Accredited Debt Relief will review your unique situation for free.