What is a debt settlement? It is debt reduction method in which debtor negotiates with creditors and tells them that he is unable to payback whole debt because of his critical financial position and asks his creditors for compensation on his debt amount. Creditors may reduce 75 percent of debt in case of self debt settlement and 50 percent to 60 percent if debtor hires some debt settlement company or lawyer for negotiating with creditors. By debt settlement though credit report of debtor is hurt especially in case of credit card debt settlement but after the debt settlement is done his credit rating is improved.  This process is normally completed in 2-3 years. Debtor has to pay heavy dues of debt settlement agencies some times it may create more debts for him rather then reduction. The record of debt settlement is not a public record; no one knows you have gone through debt settlement in past.

What is a bankruptcy? It is when you yourself short of assets and money as compared to debt to be paid. When some one declares bankruptcy he may get rid of his debts but on the other hand his credit report will be badly injured and he will not be able to take any debt or loan for several years. Bankruptcy leaves long-term impact on debtor credit history up to 10 years or more. Bankruptcy record is a public record and can be shown in high court or any judicial court. Any debtor who declares himself as a bankrupt will also be declared as a potential bad debtor and black listed debtor. Such person may face problems in continuing his job or finding any new job, in getting any place and his reputation will be hurt.

If we compare bankruptcy versus debt settlement no doubt bankruptcy can save you from paying back your debt but its consequences are worse then debt settlement so one should try to avoid it unless there is no option left.

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