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Would debt settlement help more than Chapter 7 bankruptcy?

This is not an easily answered question, but Texas residents considering their debt relief options need to understand the substantial risks involved in debt settlement. Far too many people have ended up in the same or worse financial circumstances after trying this option. In fact, many end up filing for Chapter 7 bankruptcy protection, and some admit they should have done so in the first place.

Debt settlement companies claim that they negotiate on behalf of consumers to lower the balances on the consumers' accounts. Supposedly, creditors will stop coming to the individual for payment. Moreover, a consumer will not have to face the threat of a lawsuit to collect the debt. Sounds good. Right?

Well, the reality of the situation is not quite as sunny. Settlement does not happen overnight. In fact, it could take years during which a consumer may be advised to stop making payments to creditors and, instead, put the money into a separate account that should be used to make a lump sum payment when an agreement is reached.

This could devastate a person's credit since creditors are not obligated to stop collection efforts during the supposed negotiations. In addition, the debt settlement company may charge fees. Other costs could be tacked on as well as interest on unpaid balances. Additional taxes could be applicable to any balances forgiven by a creditor.

Texas residents who are uncertain how to address their financial difficulties may want to explore all of their options before making a decision. They need to understand the good and the bad of every available option. Whether they want to know about debt settlement, Chapter 7 bankruptcy or some other avenue to debt relief, having all of the relevant information could help avoid making a costly mistake that could make achieving financial freedom even more difficult.

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