Debt Consolidation, Debt Settlement Or Bankruptcy – Which is the Best Option?

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One of the easiest things to do is to accumulate debt. In our society of consumers, it seems everyone wants to buy, buy, buy; and credit card usage is at an all time high. We no longer care if we can afford our purchases; we just want to buy more. For this reason, many folks have found themselves with more debt than they can handle. There are also a record number of accounts placed with collection agencies, which is a good indicator that there are lots of us in financial straits.Perhaps you are among those who are harassed either by mail, email, or phone with calls from collections agents who want to get paid. You know that you have to do something, but what? If this is your situation, now is the time to consider debt consolidation, debt settlement, or perhaps even bankruptcy. Let us take a look at these options to see which is best for you.Debt ConsolidationDebt consolidation is the less serious action of the three. Debt consolidation involves working with your creditors to consolidate your many debts into one, more manageable lump sum debt. Once your debts are rolled into one big debt, you can stretch out the amount of time that you have to pay the debt, and also lower the monthly payment that you make as compared to paying multiple payments to many lenders. Debt consolidation is a great way to lower the amount of money you have to pay each month, while helping to protect your credit rating from bankruptcy.Debt SettlementAnother option to rid you of much of your debt quickly is debt settlement. Debt settlement involves working with your creditors to negotiate a settlement that is less than the actual amount that you owe. Debt settlement has more implications to your credit record and credit score than debt consolidation because the remaining debt that you do not have to pay (the settlement) will be noted as a charged off account. However, by agreeing to a debt settlement, you can settle your debt for as little as 40% of what you owe your creditors, and get out of debt fairly fast. Your debt settlement payment would be based on your available income and how much you can afford to pay.BankruptcyThe last alternative to any financial problem, no matter how severe, should be bankruptcy. Bankruptcy in general (although there are different types of bankruptcy) cancels out or discharges all of the debts that you choose to include in the bankruptcy. With the exception of government debts, like student loans underwritten by the U.S. government, you can discharge any type of debt under bankruptcy.However, bankruptcy leaves a mark on your credit for seven to ten years, and it is very hard to overcome the stigma that filing bankruptcy has on your credit (although not impossible). If you have other alternatives, such as debt consolidation or debt settlement, you should consider those alternatives before considering bankruptcy in all instances.