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If you are in a dilemma about whether to file for bankruptcy or work out credit card debt settlement then you need to know a number of things to come to the final decision which is best for you.

So, you are in the position where you have been unable to pay off your credit card/s for quite a while now and its got to the stage where your card/s company have sold on your debt to a debt collection agency. Of course, the collection agency will contact you very soon as they want to get “their” money back and also profit too. They want immediate payment.

However, if not in the first instance, at least some way down the line, they will reduce the amount they are asking for, and very often it will be a very significant reduction of what was once the original debt. If you go ahead and pay, the debt collection agency will get, lets say, around 60% of the final payment you make, leaving just 40% of that for the original creditor/s.

However, when it does get to this stage in the affair, the debt collection agency will actually offer to accept a fair amount less than your actual debt currently stands at. So as an example let us say that the collection agency will receive, if you decide to pay them, a commission of 60% of the reduced debt offer. Following so far?

Lets look at actual figures here.
- Your original credit card debt stands at $15,000.
- The debt collection agency offers to accept $8,000 as full payment from you.
- The debt collection agency receives 60% of the $8,000 as commission.
- The credit card company get 40% of the $8,000.

So at the end the card company will receive a total of $3,200, which although not nearly as much as you actually owe to them, is a more than they would receive in the case of a Chapter 13 bankruptcy. In a Chapter 7 though, they would not receive a cent!

So you can in time end up paying far less than you would do otherwise via debt settlement. Anything else to think about? Yes, actually. If you are to take on bankruptcy this will remain on your credit file for a total of 10 years, affecting your credit for that period of time. If you were to take on debt settlement your file would be “tainted” for 7 years only.

Furthermore, if you do go down the bankruptcy route, you have to find the filing fees, the attorney costs, the court costs and also the pre-filing debtor education course, which you then have to sit in for. Add to this, if you do not continue with the plan your case will be dismissed and you are back to the beginning again, which means all associated costs paid to go bankrupt are gone too.

Thus it appears that unless your debt has now become entirely unmanageable – and I mean entirely out of control – you should always strongly consider a debt settlement plan before contemplating bankruptcy.

You can learn more about credit card help and about a debt consolidation program to suit your needs.