Debt settlement vs Bankruptcy

Yup, bankruptcy would cause more severe damage to one's credit score than settlement. That is why we always encourage people to explore their other options before filing for BK.

Bankruptcy should always be look as the last resort.

Not only is settlement better for the consumer, but it is also better for the creditor. In a chap 7 bk, the creditor gets nothing and has to pay highly skilled legal staff to deal with the court filings on verification etc. In a settlement it is done by a call center and they get a percentage of the debt instead of nothing.

The amount of credit card debt discharged in bankruptcies each year is enormous. Think about how much better off the creditors would have been even if they had only settled for 10%. 10% is 10 times better than 0%. Now consider that most settlements are around 30% - an amount they would never get even in a chap 13 filing.

So even though you occassionally see snipey people on here about "pay your debts" etc, the reality is that most of us were in bankruptable positions and that would be far more harmful to the economy than a settlement.

When someone is in true financial distress, settlement is a win-win.

I am trying to decide about debt consolidation. How do I find out if the company is reliable?

I have concerns that the general statement of Debt Settlement is better than Bankruptcy could be misleading. That is certainly not always the case. Sure you can make the case that in some situations your credit could recover faster based on the information currently on the credit report and how many tradelines became negative.

However there are certainly circumstances where a bankruptcy is going to be a much more viable option for a consumer than a settlement approach. Especially in situations where consumers do not have the funds or the likely ability to raise the funds to settle the debt.

I recommend that consumers explore all options including bankruptcy and then make the decision that makes the most sense for them.