In 2005 there was a reform in the bankruptcy legislation. The change in the law has made it much more difficult for a debtor to qualify for Chapter 7. A Chapter 7 will completely wipe the slate clean of the debts owed. If a debtor does not pass the "means test" to qualify for Chapter 7 then they will have to file a Chapter 13. With a Chapter 13 the court will assess your entire financial state of affairs to figure out how much you will have to pay back towards your debts within the next 5 years.

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

This is a method in which one must fall behind on their unsecured debts' while saving up the required cash on the side, to then negotiate a one time settlement, at a much lowered sum from the original balance owed. While debt settlement does have a short term harmful effect on someone's FICO score, it is no where near as bad as bankruptcy. Plus debt settlement is not by any means a public record, however a bankruptcy will be a public record for the rest of the consumers life.

A debtor can be expecting to save themselves in the ballpark of 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 others much sooner. Which makes credit card debt settlement a much more attractive offer than bankruptcy.

The truth is in many circumstances people will save more money with debt settlement, is almost reason enough. On top of the fact that the maximum it will take to be debt free is three years. When compared to a 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 there is your credit rating, debt settlement appears a lot better than bankruptcy.

There are three ways someone can go about settling their debts. First off you can do it yourself, which is greatly advised against if you do not know what you are doing. Then a debt settlement company can be hired to help settle someone's debts. There are many good 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 law firm as well. You can get more security retaining a law firm, and usually they can negotiate lower settlements as well. And being that lawyers must be reputable members of their States Bar Association you get the additional protection in knowing that they must account to a higher authority. There are far less unethical organizations that are law firms then debt settlement companies.

Joe Rodgers is a debt analyst and research assistant with the US Consumer Advocate, which primarily practices in credit card debt relief.