When it comes to choosing the best way to rid yourself of debts permanently, the choice may be quite difficult to make. While some might think that debt settlement might be a safer way out of debt than bankruptcy, there may be occasions where you might not be able to choose. So if you still have the opportunity to choose, you might want to evaluate your choices before you actually make the choice. After all, bankruptcy is often considered as a gasp of last breath by many people. In order to be able to make the right decision, you might have to think of alternative ways to help you pay off your bills without affecting your credit score as badly as insolvency. Debt settlement might be able to get you out of debt by allowing you to pay less than what you owe.

You might notice that the new law makes it more difficult to actually file for insolvency as the Federal Government definitely wants to discourage people with bad credit to file for insolvency due to the fact that a collective bankruptcy debt might project a negative economic image on the nation. Therefore there are several things you might want to consider before taking the decision to file for insolvency.

You may first want to determine the extent of your indebtedness by checking your credit report. It is advisable that you pay attention to negative items such as late payments or loan defaults on your credit report. Once you have separated such items you may have to calculate your total debt by adding up the outstanding balances on your credit account. You may then compare your total debt with your total income from all sources including paychecks, bank savings, rental income or investment returns. If your income can barely sustain your basic financial needs including housing expenses, utilities, gas and groceries and you are hardly able to save anything to settle your bills with, experts might advice you not to go for debt settlement. With debt settlement you might need to come up with a lump sum payment after a certain period of time. So, you might want to be able to save up a considerable amount of money to enable you to pay the agreed settlement amount.

It would also help if you could check if you actually qualify for a debt settlement program. There is a requirement to have a certain amount of outstanding balance in order to enable a negotiation between a debt settlement company with your creditors on your behalf. You may have to check with specific settlement companies because different companies require different minimum amount of debt.

You may also want to find out if insolvency is going to erase all your bills. Generally not all bills can be discharged through insolvency and that is why you may have to check if insolvency is indeed the best solution for you depending on your outstanding balance and the types of bills you have. Essentially the general consensus is that it is wiser for you to avoid insolvency at all costs because the consequences of insolvency filing might stick with your for several years. Your bankruptcy records may not go unnoticed by lenders if you ever decide to apply for a new loan later in your life. Your credit report may also be severely affected, as insolvency may affect your credit score by 200 to 250 points. Of course, going for a debt settlement may also cause a dent in your credit score but it will most likely be less severe than that of insolvency. You also have the option to repair your credit score immediately after settlement.

All in all, choosing between debt settlement and insolvency is no easy task. This is why it is advisable that you organize your supporting financial information in a folder so you may be able to access the information easily to enable you to make the final decision.

Author Bio: Bankruptcy bankruptcy debt bankruptcy records

Category: Finances
Keywords: Bankruptcy, bankruptcy debt, bankruptcy records