Debt settlement services are not like filing bankruptcy. Actually, a debt settlement service can be used to avoid having to file for bankruptcy. Under this type of program your creditors will receive payments from the service, whereas by filing bankruptcy only secured creditors will receive payments. Also, filing bankruptcy could mean having to spend over a thousand dollars just to file, while most debt services are free or have a very minimal fee.
These kind of programs exist to help people pay their bills when they are struggling to pay what outstanding debt they have. By contacting the creditors and having them agree to a structured payment plan this could help someone’s credit. Rather than the bill going unpaid and creditors continuing to call for payments the debt will now be set up under a settlement plan by the service which will not only get the bill paid in a timely manner, but also enable consumers to improve their credit rating and avoid bankruptcy.
When bankruptcy is filed most creditors will no longer have to be paid. Secured loans, such as car loans and mortgages, will still have to be paid after the discharge of the bankruptcy if the consumer wants to keep the car or the home. Filing of bankruptcy, however, will effect someone’s credit for at least seven years. Most debt settlement plans only have a five year term and as long as they are adhered to this type of plan can help get people’s credit back on track and even improve their credit score.
As you can see, there is a big difference between filing bankruptcy and using a debt settlement service. While it may not be possible for everyone to avoid bankruptcy, even after using one of these services, it is usually a better option than filing bankruptcy before giving these services a chance.