Debt Settlement vs. Bankruptcy: Which Is Better?
Throughout South Carolina and in Columbia specifically, many residents struggle with crushing debt from their mortgages, car loans, credit cards, and personal loans. Without any financial wiggle room, those who experience the pressure of excess debt are often at a loss about what they can do to get out from under it. Because many people associate bankruptcy with financial failure, they’d prefer to explore debt settlement, but this approach is shortsighted. Explore your best options with our experienced Columbia bankruptcy attorneys at Reed Law Firm, P.A., today.
Bankruptcy and Debt Settlement Defined
To begin, it’s important to define bankruptcy as it relates to debt settlement.
Bankruptcy
Bankruptcy is a legal process designed to protect, rather than to focus blame on or punish, consumers. The bankruptcy process affords distinct benefits backed by both federal and state law. Bankruptcy cases in Columbia are filed with the District of South Carolina U.S. Bankruptcy Court and are heard in the J. Bratton Davis U.S. Bankruptcy Courthouse.
Debt Settlement
Debt settlement, on the other hand, is a private action that the government does not directly sponsor. The process generally involves negotiating a payment plan with creditors for a lump sum paid upfront, representing a fraction of the total owed. Consumers typically make regular payments into the settlement plan until the payment amount has accrued.
Ultimately, debt settlement lacks the legal protections that bankruptcy offers. It’s also less predictable and doesn’t offer as broad a range of debt relief options as bankruptcy does.
Bankruptcy vs. Debt Settlement in Columbia
Often, bankruptcy is a better option than debt settlement, based on a range of primary factors.
Discharging Most or All Debt
In a Chapter 7 bankruptcy, you can completely discharge most, if not all, of your common unsecured debts like credit cards, personal loans, and medical bills. Chapter 13 bankruptcy results in a structured repayment plan that can eliminate your remaining balances at the end of your payment plan, which will be either 3 or 5 years.
Stopping All Collections
Once you file for bankruptcy, the law implements an automatic stay that puts an end to all the following:
- Earnings garnishment
- Related lawsuits
- Harassing calls and letters from debt collectors
- Foreclosure actions
This is a level of protection that debt settlement simply can’t offer.
Speedier Financial Recovery
Yes, bankruptcy is a process, but it tends to offer consumers speedier financial recovery than debt settlement can. Ultimately, debt settlement can drag on. And because it doesn’t offer the same level of debt relief, it can be more difficult to turn your financial standing around.
Our Experienced Columbia Bankruptcy Lawyers Can Help
Your financial situation is unique to you, and our dedicated bankruptcy attorneys at Reed Law Firm, P.A., are committed to helping you find the right answers for you. We’re proud to faithfully serve clients throughout Columbia and the State of South Carolina, and we welcome the opportunity to help you as well. Learn more by contacting us online or giving our firm a call at 803-726-4888 today.
