In 2005 there was a reform in the bankruptcy legislation. This reform changed the laws making it much harder for a debtor to file Chapter 7. Which is a full exemption of the debt owed. If someone does not pass the “means test” to qualify for Chapter 7 then they must look to go through whats called a Chapter 13. With a Chapter 13 the court will review your entire financial situation to come to a determination how much you will have to pay back towards your debts over the course of five years.

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

This is a process in which one must default on their credit cards while saving up the necessary money on the side, to then negotiate a one time settlement, at a much reduced amount from the balance owed. While debt settlement does have a short term negative effect on someones credit, it is no where near as bad as bankruptcy. And is not made a public record like bankruptcy.

A debtor can expect to save themselves in the ballpark of 50% of what the debt was originally. And look to have themselves become debt free within a matter of 2-3 years for some much sooner. Therefore making credit card debt settlement a much more attractive offer than bankruptcy.

The fact that in many cases people will save more money with debt settlement is almost reason enough. But then throw in the fact that it will take at most 3 years. When compared to a bankruptcy that will take five. Plus settlement being a private issue and not made a public record for the rest of your life, as with a bankruptcy. Then of course the issue of the credit report, debt settlement looks a lot better than bankruptcy.

There are three ways someone can go about settling their debts. One is they can do it themselves, 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 someones 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 there are debt settlement law firms 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 accredited members of their States Bar Association you get the extra protection in knowing that they must report to a higher authority. There are far less scam operations that are law firms then debt settlement companies.