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If you are in a dilemma about whether to file for bankruptcy or work out credit card debt settlement then you need to know a number of things to come to the final decision which is best for you.

So, you are in the position where you have been unable to pay off your credit card/s for quite a while now and its got to the stage where your card/s company have sold on your debt to a debt collection agency. Of course, the collection agency will contact you very soon as they want to get “their” money back and also profit too. They want immediate payment.

Yes that’s a fact, they want their money and they want it now, but what you will tend to find is that the amount they want is a much-reduced amount to the actual balance of the debt. You may not find that initially this is the case however, but in time they will try to negotiate with you upon the payment. If you do go ahead and pay them then the debt collection agency will receive – lets say around 60% of this amount as a commission, and the lending company will then receive the final 40% – a much reduced amount to what is actually owed to them.

However, when it does get to this stage in the affair, the debt collection agency will actually offer to accept a fair amount less than your actual debt currently stands at. So as an example let us say that the collection agency will receive, if you decide to pay them, a commission of 60% of the reduced debt offer. Following so far?

- Lets imagine you owe $20,000 to your credit card debts.
- The debt collection agency is asking for a full payment of only $10,000 from you to fully settle the debt.
- The collection agency thus gets 60% of this = $6,000.
- The original creditor receives the remaining 40% = $4,000.

The credit card company will obviously receive a much-reduced amount to what is actually owed to them and the reason they are willing to accept this is that they compare this figure firstly to what they would get if you were to declare Chapter- bankruptcy – they would get less. If you were to declare Chapter 7 however, they would get absolutely nothing!

By taking the bankruptcy route you also have to pay other fees such as the following:
– filing fee
– attorney fees
– court fees
– pre-filing debtor education course fee (and you have to sit the exam too)

If you were to take the route of bankruptcy there are other fees to pay, namely:
– attorney fees
– a bankruptcy filing fee
– court fees
– a fee payable for a pre-filing debtor education course and you have to take the course too.
And if you were to default on the bankruptcy terms and conditions you would have to start again from the beginning, and would at the same time lose all that money paid towards the above costs. A high price to pay for no results!

Thus it appears that unless your debt has now become entirely unmanageable – and I mean entirely out of control – you should always strongly consider a debt settlement plan before contemplating bankruptcy.

You can learn more about credit card help and about a debt consolidation program to suit your needs.

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