There is much debate among professionals as to which debt relief solution is best.
The real answer depends on the person's financial situation.
Because no two people have the same financial situation, there really is no short answer to which type of debt relief is best.
However, there is much to be considered whether choosing to get out of debt on your own, negotiate with creditors or file for bankruptcy.
Traditional Options There are several different options available for debt relief outside of bankruptcy.
A debt management plan is one that is developed and implemented by the debtor.
You don't always have to seek professional help when attempting to resolve your debts, but it can be helpful.
In a debt management plan, you would outline the debts you are targeting for reduction and develop a strategy for repaying those debts as quickly as possible.
This may include increasing your budgeting and restricting your spending, or you may choose to liquidate some assets to gain more money to pay the debts.
Debt settlement and consolidation options are also fairly popular among those who wish to get out of debt without the help of bankruptcy.
However, both of these options typically require the help of a third party agency that often mediates negotiations with a creditor.
Settling debts essentially means that you are able to obtain an agreement that allows you to repay less than what is actually owed on the account.
Creditors are very strict when it comes to agreeing to debt settlements and the process can be complicated.
Debt consolidation is not necessarily a complicated process, but one that should still be pursued with caution.
Consolidating debts involves accepting a new loan that covers the amount owed to all creditors.
The consolidation loan lender pays all of your creditors individually, while you pay them a single loan payment with interest.
The problem here becomes the issue of being locked into a new loan with a longer loan term and higher interest rates.
Bankruptcy Although bankruptcy isn't for everyone, it can certainly be beneficial to many people.
Whether you are looking to protect yourself from creditors, keep your assets safe or just looking to resolve your debts through a legal medium, bankruptcy can bring additional protection than other forms of debt relief.
Like a debt settlement, a Chapter 7 bankruptcy can eliminate debts with little cost to you.
However, a Chapter 7 bankruptcy can also prevent creditors from attempting to collect in the future.
A Chapter 13 bankruptcy could be viewed as the legal equivalent of a debt consolidation, except that it does not require you to take out a loan.
You will be able to make a single payment that goes towards repaying your debts, without having to worry about interest rates and longer loan terms.