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California personal bankruptcy versus debt settlement

Negative financial circumstances can sometimes lead people to financial disaster. In order to keep their heads above water, some California consumers resort to filing personal bankruptcy. In some instances, creditors may offer to settle the debt for a fraction of what one may owe.

Consumers are sometimes faced with either settling with their creditor or filing a bankruptcy petition. If a creditor has offered some form of a settlement, one needs to be confident that they can afford the payments they have agreed to settle for. It can be beneficial to one's credit to pay even a portion of the debt. Also, when a debt is settled, it will fall off of one's credit report in seven years.

There are two bankruptcy filings that one may qualify for and that is Chapter 7 and Chapter 13. The difference between the two is Chapter 13 does not automatically discharge debts that are owed and some form of payment is required toward the debts. However, Chapter 13 will also only remain on a credit report for seven years. Chapter 7 is based on the income level in one's area and remains on a credit report for ten years.

In the long run, a California consumer is regarded as more of a high risk when a personal bankruptcy appears on their credit as opposed to settling the debt. Either way, as long as the consumer keeps up with their current monthly payments after bankruptcy or debt settlement, their credit will be positively impacted in the future. Bankruptcy has it's initial drawbacks; however, it can offer relief and lead individuals to a fresh financial start.

Source:, Bankruptcy's Credit Damage Worse than Debt Settlement's, Jane Mcnamara, Oct. 10, 2013

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