These days, the process of obtaining credit has become quite hassle free and thus some people end up taking loans that they eventually cannot pay up. Since the number of people who are finding it difficult to repay their debts has increased, the number of agencies helping people to deal with their liabilities has also increased. Legislators are also doing their bit by trying to make laws that prevent people from opting for the wrong loans.If you are in situation where you are finding it impossible to deal with all your liabilities, you can neither waste time doing nothing about the problem because it will only aggravate with time nor can you take a hasty decision that will ruin you financially. The thing that you must avoid as far as possible is declaring yourself broke. If you do this, then you will find it extremely difficult to get a loan for the next seven years. Some people feel that they will not face a situation where they will have to take a loan for seven years if all their liabilities are liquidated.However, one never knows what the future holds. Incidents like accidents and medical emergencies arrive unannounced. If such an event does take place, you will have to run from pillar to post to procure money because most mainstream lenders will not be willing to give you the money. Only cutthroat creditors will give you the money by making you agree to punishing terms and conditions. Thus you must think very carefully before going for bankruptcy.One popular option for people who want to avoid bankruptcy is debt consolidation. This is simply the replacement of one or more loans with one ‘consolidated’ loan. This alternative is viable in cases where a lender can be convinced to provide terms that are softer than the terms of the older liabilities. However, lenders are not always willing to do this favor to the borrower and usually get the lender to agree to terms that are only marginally better. In return, the creditor gets to earn interest for years.If you want to get rid of your debts once and for all, you should opt for debt settlement. This is better that debt consolidation because in this case the borrower actually pays less than what he or she owes the lender by remitting a lump sum amount. Lenders agree to this because they can reduce the chances of losing more if a borrower declares himself to be broke.