After the new bankruptcy laws were passed many consumers began opting for debt settlement programs.
This is mainly due to the fact that bankruptcy is much more difficult to qualify for and far less advantageous for consumers seeking debt relief.
Up until October 27th 2010, debt settlement was still a risky option.
Now it isn't.
On that date, the FTC passed new laws which makes it illegal for debt relief companies to collect upfront fees.
Those that enter a settlement program now will not have to pay a fee unless the negotiation company is able to eliminate at least 35% of your unsecured debts.
So if you have $40,000 in credit card debt, and the negotiation company isn't able to eliminate at least $14,000 off the balance, you do not have to pay them for their efforts.
The new bankruptcy laws were passed in 2005 and ever since then bankruptcy has become a much less advantageous option for consumers and small businesses.
These laws make Ch.
7 bankruptcy nearly impossible to qualify for.
Ch.
7 bankruptcy is the "fresh start" bankruptcy where nearly all your debts are forgiven.
In the past consumers would file for Ch.
7 and it was easy to qualify for and have your debt completely forgiven.
Now you are much more likely to qualify for Ch.
13 which basically just reorganizes your debt and makes it more manageable to payback.
Ch.
13 is similar to debt settlement with one major difference.
Bankruptcy will damage your credit score much worse than a settlement will.