People are now shifting more and more towards debt settlement
instead of filing a bankruptcy.
They will definitely be looking for settlement agencies as the new bankruptcy
law will go into effect on October 17, 2005.

The consumers seeking bankruptcy
will think before they would leap and many will probably get enrolled into a debt settlement program.

The New Law

Today nearly 7 out of 10 people who file for bankruptcy are granted Chapter 7 status of bankruptcy which states that the borrower's unsecured debts will be totally erased.


The new law however is a bit harsh on all the fresh starters who would think
about bankruptcy. Under the new law, if your income is above the median for
your state, or you can repay at least $100 a month, you will not be granted
Chapter 7 status, instead, you
will be shifted to Chapter 13,
in which you will have to pay back a portion of the debt over 3-5 years of time
frame. Definitely, your credit report
will also get more negatives then it would have if you were in Chapter 7
status or you were in a debt settlement plan.



Another difference among debt settlement and bankruptcy is that the court also calculates your allowable expenses
by using approved IRS schedules and not your actual documented expenses. So
even if you don't think you can pay $100 a month, the court will have a separate
scrutiny and will push you into a 5 year plan of debt
consolidation which wouldn't have been a case if in a debt settlement program.

So is Debt Settlement a Better Option?

Yes it is. There are several views that exist in favor of and against debt settlement. In the light of the above fact, debt settlement will be a choice adopted by most of the people seeking help instead of bankruptcy. People who are against debt settlement don't appreciate the people who try hard not get bankrupt and face a failure in life.