Skip to content
United Settlement
  • Manage Your Debt
    • get-startedGet Started
    • settlementDebt Settlement
    • consolidationDebt Consolidation
    • debt-managmentDebt Management
    • bankruptcyBankruptcy
    • credit-cardCredit Card Debt
    • businessBusiness Debt
    • car-loanAuto Loan Debt
    • student-debtStudent Loan
  • Understand Your Debt
    • credit-cardCredit Card
    • business-2Small Business Debt
    • medicalMedical
    • loansLoans
    • umbrellaCredit Card Relief
    • interest-ratesInterest Rates
    • student-debtStudent Debt
  • Tools & Resources
    • faqFAQs
    • credit-cardCredit Guidance
    • calculatorCalculator
    • call-usContact Us
    • contact-usAbout Us
  • More
    • Debt Settlement
    • Debt Consolidation
    • Reviews
    • FAQs
    • About Us
    • Contact Us
    • Blog
    • Sitemap
    • Debt Relief by State
    • Careers
Debt Relief & Settlement Programs
Logo
United Settlement
phone icon 888-574-5454
client icon Client Log In
  • More
    • About Us
    • Proven Results
    • Reviews
    • Contact Us
    • Debt Settlement
    • Debt Consolidation
    • Debt Management
    • Business Debt Relief
    • Credit Card Debt Relief
    • Debt Relief by State
    • FAQs
    • Blog
    • Sitemap
    • Careers
Qualify For Debt Relief
Debt Relief & Settlement Programs
  • Manage Your Debt
    • get-startedGet Started
    • settlementDebt Settlement
    • consolidationDebt Consolidation
    • debt-managmentDebt Management
    • bankruptcyBankruptcy
    • credit-cardCredit Card Debt
    • businessBusiness Debt
    • car-loanAuto Loan Debt
    • student-debtStudent Loan
  • Understand Your Debt
    • credit-cardCredit Card
    • business-2Small Business Debt
    • medicalMedical
    • loansLoans
    • umbrellaCredit Card Relief
    • interest-ratesInterest Rates
    • student-debtStudent Debt
  • Tools & Resources
    • faqFAQs
    • credit-cardCredit Guidance
    • calculatorCalculator
    • call-usContact Us
    • contact-usAbout Us
  • More
    • Debt Settlement
    • Debt Consolidation
    • Reviews
    • FAQs
    • About Us
    • Contact Us
    • Blog
    • Sitemap
    • Debt Relief by State
    • Careers
United Settlement » Debt Settlement » Debt Settlement vs Bankruptcy
admin January 3, 2018

Debt Settlement vs Bankruptcy

The processes of debt settlement and filing for bankruptcy represent two viable alternatives for an individual buried under insurmountable debt.

While choosing between one or the other may be akin to the feeling of being caught between a rock and a hard place, there are positives to be accrued in either approach. In this article, we will describe both processes while comparing and contrasting the virtues and drawbacks of each

Debt Settlement Vs Bankruptcy
Excellent

Based on 377 reviews.
Overall 4.4 out of 5 stars

View All Reviews

Annette Huggins

March 14

That when it seems like nobody can help United will.

This was a great experience for me. I am just starting but Madelene Gallon made me feel like we were friends for years. She tried to make me feel that she would help me and make sure I got the best deal...

Kiirstin

March 01

Kind and caring

Had been searching for a while for a company I could trust to get me out of crippling debt. Really didn’t think it was possible. Spoke to Ben at United Debt and he assured me that not only was it possible,...

Kiirstin

March 01

Kind and caring

Had been searching for a while for a company I could trust to get me out of crippling debt. Really didn’t think it was possible. Spoke to Ben at United Debt and he assured me that not only was it possible,...

Dylan

February 28

Quick, easy assistance!

I've been working with Ben at United Debt to help me organize and get out of debt for once - I've been dealing with debt for ages and Ben showed me some simple ways to begin dealing with things to keep...

Takota Carrie

February 14

I need help

I really appreciate

JONICA Amber PIRON

December 21

Great!

Renika went above and beyond today to help me. She is wonderful to work with! Thank you again Renika for all of your help today! Happy Holidays to you!

Jayvon

December 20

Paying back

They where great listeners

Shawn abetha

December 14

Everything

Thanks

Robert Phillips

November 23

Do your home eork

Paid several thousand dollars and nothing done. Ended up settling 90%by myself. This is a preatory company. So do your homework. This will never post.

Dm

November 18

Customer service is truly helpful

Renika was so helpful. My account was paid off but I kept receiving notifications. She cleared up the situation.

Jose Rosa

November 16

Great Customer Service

Renika did a wonderful job handling my questions and transactions. She is very patient on the phone and took care of my needs accordingly.

Russ

November 03

Very helpful

Renika did a great job in answering all of my questions in a timely manner. She was polite and friendly. Keep her on the payroll.

Anthony Desoto

October 31

What's Important to me is United Settlement Costumer service !

United Settlement Costumer service is Amazing Everyone is Professional . I am so happy choosing them with my card Debt. thank you all for helping me out .

Ri cky

August 23

That this company has integrity!

A responsive company that keeps it clients up to date and fully informed. I like the fact that I can send them a text and be guaranteed an answer within 24 hrs.

Jerry Bolandis

June 04

Professional and focused on facts and truth not hype. Excellent. We want to know facts.

Great work very professional and great updates. Communication is excellent.

janice head

October 25

trust them

Excellent. Also each time i call there they treat me with respect even though they are probably thinking jerk . You sure have made mess of your life. but they have been taught to smile smile smile. this...

Scott W O'Neill

August 01

Thanks for all your help and negotiations.

Thanks for the update! I have faith in you guys and will continue my payments. Thanks for all your help and negotiations.

Cassandra Robinson

July 30

That A Settlement Was Entered.

I Absolutely Love You All At United Settlements. You All Have Saved My Credit Solutions. I Would Refer Everyone To You Services.

Mildred Yvonne Sherron

July 16

The results of the settlement attempts.

So far, I have found United Settlement more than satisfactory. Very conscientious and very efficient in providing a service in debt settlement. Thank you and all the members of your team who are assisting...

Diana Cardona

July 16

Tough Financial Hard Times During Covid-19

I signed up with United Debt Settlement because of large credit card debts, which had taken a financial toll on my credit. UDS has an outstanding reputation assisting clients like me achieve financial recovery...

Related to: Debt Settlement and Bankruptcy

  • Debt Settlement
  • Debt Management
  • Bankruptcy
debt-to-savings-balance

The Basics of Debt Settlement

Debt settlement takes place when a debtor successfully negotiates a payoff amount for less than the total balance owed on a debt. This lower amount is agreed to by the creditor or collection agency and is fully documented in writing. Ideally, this lower negotiated amount is paid off in one lump sum, but it can also be paid off over time.

Even though it may seem surprising that banks would settle for less than what is owed, the statistical certainty that not all borrowers will actually pay back is built into a bank’s carefully formulated lending model. Understanding this reality makes it easier for many debtors to pursue debt settlement.

The process of debt settlement focuses primarily on unsecured debt, such as credit cards. Additionally, creditors are more likely to settle once a debtor has already demonstrated an inability to pay.

Therefore, if you’ve already fallen behind on payments by four or five months, it could be the ideal time to begin negotiating with creditors for the best settlement, as the bank still controls your account but also knows that the clock is ticking closer to charge-off, the point at which it would likely never recover anything from the delinquent account again.

Consequences of Bankruptcy

Bankruptcy should not be entered into lightly without an understanding of its long-term consequences. A Chapter 7 bankruptcy will remain on a credit report for ten years from the filing date, and a Chapter 13 bankruptcy will remain on a credit report for seven years from the filing date.

Either can impede a borrower’s ability to obtain new lines of credit, and potential landlords and employers may frown upon this aspect of a financial history. It is likely that a bankruptcy discharge will lower a FICO credit score toward the low 500s.

However, with careful planning and responsible financial behavior, particularly in the first two years following a bankruptcy discharge, it is possible to rebuild a FICO credit score to healthy levels following bankruptcy.

apply here

Debt Settlement vs Bankruptcy

fix-your-finances

Should I Pursue Debt Settlement or Bankruptcy?

The choice between debt settlement and bankruptcy will depend upon your aggregate debt level, the nature of your debt (unsecured vs. secured), your income, and additional considerations such as potential tax consequences and credit score impact.

For instance, even if your total debt level is high, if most or all of the debt is unsecured, debt settlement may be your best option. However, if you are carrying onerous secured debt (such as a home mortgage or auto loan) as well, pursuing bankruptcy could be the better option.

Regarding discretionary income, if you are able to put aside a certain fixed amount each month for an eventual settlement payment, then you can consider debt settlement. However, if you’re finding it unrealistic to accumulate any savings after accounting for basic necessities each month, then pursuing bankruptcy may be better. Do note that you will still need to meet certain income conditions to qualify for filing either Chapter 7 or Chapter 13.

Next, if you’re looking to reduce your debt burden related to certain private student loans (a form of unsecured debt), then debt settlement could work in your favor, as it is difficult to discharge private student loans through bankruptcy. Finally, regarding tax consequences, debt settlement savings in excess of $600 are considered a federally taxable event. However, this is not the case with bankruptcy, as discharged debts are usually not considered taxable income.

If you find yourself saddled with too much debt, regardless of how difficult things may feel today, there is a pathway out toward financial wellness. Regardless of whether you choose to pursue debt settlement or bankruptcy, you can effectively position yourself to secure a new unsecured credit line within two years of completing either. Contact us here at United Debt Settlement to discuss your various options as they relate to your specific financial situation.

Debt Settlement vs. Bankruptcy FAQs:

Is it better to file bankruptcy or settle debt?

The choice between debt settlement and bankruptcy will depend upon total debt level, the nature of the debt (unsecured vs. secured), income levels, and additional considerations such as potential tax consequences and credit score impact. Even if total debt level is high, if most or all of the debt is unsecured, debt settlement can be the better option. If you are carrying high levels of secured debt (such as a home mortgage or auto loan), pursuing bankruptcy could be the answer. However, bankruptcy should not be entered into lightly without an understanding of its long-term consequences. A Chapter 7 bankruptcy will remain on a credit report for ten years from the filing date, and a Chapter 13 bankruptcy will remain on a credit report for seven years. Either do significant damage to a FICO credit score and can impede the ability to obtain new lines of credit, and potential landlords and employers often frown upon this aspect of a financial history.

How many times can you file bankruptcy?

There is no specified limit to the number of times that someone may seek Chapter 7 or Chapter 13 bankruptcy protection. However, there are restrictions that govern the frequency with which someone may file, and these restrictions depend upon the previous type of bankruptcy filed and the filing date. For individuals who have previously filed Chapter 7, they must wait another eight years to again file Chapter 7, or wait four years to file Chapter 13. For individuals who have previously filed Chapter 13, they must wait another two years to again file Chapter 13, or wait six years to file Chapter 7.

How long does it take to file bankruptcy?

A Chapter 7 bankruptcy typically takes up to six months to complete, with a bankruptcy discharge granted within four months of filing in most cases. A Chapter 13 bankruptcy is different in that it typically involves a 3 to 5 year repayment plan.

How much should you be in debt before filing bankruptcy?

There is no minimum amount of debt required to file bankruptcy. The question of how much debt someone has is important in deciding whether to file bankruptcy, but this should be taken in context with additional considerations such as income level and whether it can ultimately prove affordable to pay back debts. Alternative forms of debt relief that include debt settlement, debt consolidation and debt management plans should be investigated prior to making any decision to file bankruptcy, given the long-term consequences of doing so.

Can you file bankruptcy twice?

Yes, an individual may file bankruptcy twice – in fact there is no specified limit to the number of bankruptcies that someone can file during a lifetime – although there are restrictions involving how much time must elapse between successive filings.

  • Contact Us
  • 240 West 37th Street
    Suite 400
    New York, NY 10018
  • (888)-574-5454
  • [email protected]
  • Privacy Policy
  • Terms & Conditions
  • Debt Relief Services
  • Debt Settlement
  • Business Debt Relief
  • Credit Card Help
  • Debt Consolidation
  • Debt Management
  • Student Loan Help
  • Careers
Learn more about debt relief


    • facebook
    • Google Plus
    • Twitter
    • YouTube
    • Instagram
    • Linkedin
    • facebook
    • Tools & Resources
    • Contact Us
    • About Us
    • Blog
    • Debt Calculator
    • Frequently Asked Questions
    • Sitemap
    • Reviews
    • Client Login
    Free Savings Estimate
    Apply Here
    Clients who stay according to debt relief program can realize approximate savings of 50% before fees, or 25% including fees, over 24 to 48 months. All claims are based on enrolled debts. Not all debts are eligible for enrollment. Not all clients complete our program for reasons such as: their ability to save sufficient funds. Estimates based on prior results, which will vary based on specific circumstances. We do not guarantee that your debts will be lowered by a specific amount or percentage or that you will be debt-free within a specific period. We do not assume consumer and/or business debt, provide tax, bankruptcy, accounting, legal or credit repair services/ advice. Our program is not available in all states. Please contact a tax professional to discuss tax consequences of settlement. Please consult with a bankruptcy attorney for more information on bankruptcy. If you have any additional questions please contact us. NMLS ID: 1947026
    Copyright 2023. United Debt Settlement, LLC