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Back in 2005 there was a changeover in the bankruptcy laws. The change in the law has made it much more difficult for a American to file Chapter 7. Which is a full discharge of the debt owed. If a consumer does not pass the "means test" to qualify for Chapter 7 then they will have to file a Chapter 13. A Chapter 13 is a court run settlement process. In this process the court dictates what you will re-pay to your creditors for a five year period, by examining your finances in great detail.

So obviously a Chapter 13 is not as attractive of an offer as a 7. This pushes many debtors away from filing bankruptcy to look for different methods of credit card debt relief. One of the popular and more attractive methods then becomes credit card debt settlement.

This is a process in which one must default on their unsecured debts' while saving up the needed cash on the side, to then negotiate a one time settlement, at a much lowered amount from the original balance owed. While debt settlement does have a temporary harmful effect on someone's FICO score, it is not anywhere near as negative as bankruptcy. Plus debt settlement is not by any means a public record, however a bankruptcy will be a public record for the entirety of the debtors life.

A debtor can be expecting to save themselves roughly 50% of what the debt was at first. And look to have themselves become free of the shackles of debt within a matter of two to three years for some much sooner. Making credit card debt settlement a much more attractive proposal than bankruptcy.

The fact that in many cases debtors will end up saving more money with debt settlement, is almost reason enough. But then throw in the fact that it will take at most three years. When compared to a Chapter 13 bankruptcy that will take five. Plus settlement is a private matter and not a publicly known record for the remainder of your life, as with a bankruptcy. Then of course the issue of the credit report, debt settlement appears a lot less negative than bankruptcy.

There are three ways in which one can go about settling their debts. One is they can do it themselves, which is greatly advised against if you don't know what you are doing. Then a debt settlement company can be hired to help settle someone's debts. There are many ethical debt settlement companies however one must due diligence on a company to make sure they are reputable and honest. Then you can contact a debt settlement attorney as well. You can get more protection using a law firm, and usually they can negotiate lower settlements as well. And being that lawyers must be active members of their States Bar Association you get the extra protection in knowing that they must answer to a higher power. There are far less scam establishments that are law firms then debt settlement companies.