\n
Typically debt-settlement is an alternative to filing bankruptcy. But, the debt settlement approach to getting out of debt is risky. Some creditors may not agree to settle, and they may sue to collect the debt you owe. Also, there is no guarantee the DSC you hire will succeed.<\/p>\n
How Does Debt Settlement Work?<\/h2>\n
To start the process, your DSC instructs you to stop paying to your credit card and other bills. Instead, you\u2019ll pay the DSC. Your monthly payment is based on a formula that considers <\/p>\n
(i) the total debt you have, <\/p>\n
(ii) how much money the DSC believes you need to make a settlement offer your creditors will accept, and <\/p>\n
(iii) what you can afford to pay monthly.<\/p>\n
The first benefit of using a DSC is that your monthly payment is affordable. You no longer struggle to make minimum payments. But the benefit stops there.<\/p>\n
The DSC will accumulate your payments in a savings account until you\u2019ve saved enough to make a reasonable offer. When you\u2019ve saved enough money, the DSC will use you\u2019re your money to try to settle with your creditors and pay only a portion of what you owe. <\/p>\n
Depending on the amount you owe and how many creditors you have, saving enough money to make a reasonable offer of settlement can take several years.\u00a0 <\/p>\n
While you\u2019re saving, you\u2019re not paying your creditors. This will harm your credit score, and the missed payments will be reported for up to seven years. Also, under federal law, credit card companies must close and charge off credit card debt after 180 days. Charge-offs are derogatory marks on your credit report that last for 7 years, as well. <\/p>\n
More important, your creditors will sell your accounts to secondary creditors. Secondary creditors are individuals and companies that buy debt for pennies on the dollar and then work hard to collect it. These creditors are more aggressive than primary lenders; they will sue you to turn a profit from buying your debt. <\/p>\n
Debt Settlement vs. Debt Management?<\/h2>\n
An alternative to debt settlement is debt management. Debt management programs, \u201cDMPs,\u201d help you reorganize your finances by intervening with your creditors to negotiate interest rate reductions and extended repayment plans. DMP services help you pay your debt in full with minimal damage to your credit score.<\/p>\n
DMPs are often nonprofit companies. A DMP may still a charge fee for services, but the cost will be far less than what you\u2019ll pay a debt settlement company.<\/p>\n
Debt management programs\u00a0also negatively affect your overall credit score. Many of your creditors will close your account, which affects your credit utilization ratio. Closing accounts will cause your credit utilization to increase. Second only to your payment history, credit utilization is a crucial factor in calculating your credit score. See experian.com.<\/a> Still, a DMP repayment plan will do less harm to your overall credit rating than debt settlement.<\/p>\nIs Hiring a Debt Settlement Company a Good Idea?<\/h2>\n
Probably not. Here\u2019s a comparison of the key differences – <\/p>\n
\n- \n
Debt Settlement is More Expensive than Bankruptcy<\/h4>\n<\/li>\n<\/ul>\n
When you combine the fees you\u2019ll pay your DSC with the amount you\u2019ll pay your creditors in the settlement, filing Chapter 7 or Chapter 13 bankruptcy is usually far less expensive. Expect to pay your attorney $2,500 for a Chapter 7 case and $3,500 for a Chapter 13 case. In most cases, that will be less than 20% to 25% of your debt. <\/p>\n
Also, because credit card and most other unsecured debt will be discharged in bankruptcy, you\u2019ll pay no settlement amount at all.<\/p>\n
\n- \n
Bankruptcy is Quicker than Debt Settlement<\/h4>\n<\/li>\n<\/ul>\n
Bankruptcy lets you get on with your life much quicker than debt settlement does.<\/p>\n
If you are eligible for Chapter 7 Bankruptcy, becoming debt-free takes just a few months, making it much quicker than any debt settlement approach. In Chapter 13, you\u2019ll make payments on your secured debt for 60 months. But, the initial legal proceedings also take only a few months.<\/p>\n
\n- \n
There are Few Guarantees in Life, but Compared to Debt Settlement, Bankruptcy Comes Pretty Close <\/h4>\n<\/li>\n<\/ul>\n
If you choose debt settlement as a debt solution, and one of your creditors refuses to negotiate, you may face lawsuits, wage garnishments, or bank levies. When you file bankruptcy, the automatic stay goes into effect to protect you, and creditors are forced to stop collection activity the moment your case is filed. Also, an honest and straightforward bankruptcy is rarely denied.<\/p>\n
\n- \n
The Negative Credit Impact of Debt Settlement and Bankruptcy are Almost Identical<\/h4>\n<\/li>\n<\/ul>\n
Finally, debt settlement and bankruptcy have similar lasting effects of your credit score and history. Late payments and charge-offs on your credit report remain for up to 7 years.\u00a0 Filing Chapter 13 Bankruptcy leaves a black mark on your credit for 7 years. A Chapter 7 Bankruptcy case is reported for 10 years.<\/p>\n<\/div>\n\n","protected":false},"excerpt":{"rendered":"
Typically debt-settlement is an alternative to filing bankruptcy. But, the debt settlement approach to getting out of debt is risky. Some creditors may not agree to settle, and they may sue to collect the debt you owe. Also, there is no guarantee the DSC you hire will succeed. How Does Debt Settlement Work? To start […]<\/p>\n","protected":false},"author":1,"featured_media":98804,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[97],"tags":[11433,11265,10738,25435,25434,23932],"dealstore":[],"offerexpiration":[],"class_list":["post-98803","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-legal","tag-bankruptcy","tag-debt","tag-ernest","tag-esq","tag-ianetti","tag-settlement"],"yoast_head":"\n
Bankruptcy v. Debt Settlement \u2014 Ernest G. Ianetti, Esq. - Som2ny Network<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fivemor.com\/?p=98803\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Bankruptcy v. Debt Settlement \u2014 Ernest G. Ianetti, Esq. - Som2ny Network\" \/>\n<meta property=\"og:description\" content=\"Typically debt-settlement is an alternative to filing bankruptcy. But, the debt settlement approach to getting out of debt is risky. Some creditors may not agree to settle, and they may sue to collect the debt you owe. Also, there is no guarantee the DSC you hire will succeed. How Does Debt Settlement Work? To start […]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/fivemor.com\/?p=98803\" \/>\n<meta property=\"og:site_name\" content=\"Som2ny Network\" \/>\n<meta property=\"article:published_time\" content=\"2025-02-20T05:44:25+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/fivemor.com\/wp-content\/uploads\/2025\/02\/1740030268_format1500w.jpeg\" \/>\n\t<meta property=\"og:image:width\" content=\"1500\" \/>\n\t<meta property=\"og:image:height\" content=\"1000\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"admin\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"admin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/fivemor.com\/?p=98803#article\",\"isPartOf\":{\"@id\":\"https:\/\/fivemor.com\/?p=98803\"},\"author\":{\"name\":\"admin\",\"@id\":\"https:\/\/fivemor.com\/#\/schema\/person\/b85e3c3dc0e1daea076524dc8810c371\"},\"headline\":\"Bankruptcy v. Debt Settlement \u2014 Ernest G. Ianetti, Esq.\",\"datePublished\":\"2025-02-20T05:44:25+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/fivemor.com\/?p=98803\"},\"wordCount\":805,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/fivemor.com\/#organization\"},\"image\":{\"@id\":\"https:\/\/fivemor.com\/?p=98803#primaryimage\"},\"thumbnailUrl\":\"https:\/\/fivemor.com\/wp-content\/uploads\/2025\/02\/1740030268_format1500w.jpeg\",\"keywords\":[\"bankruptcy\",\"Debt\",\"Ernest\",\"Esq\",\"Ianetti\",\"Settlement\"],\"articleSection\":[\"Legal\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/fivemor.com\/?p=98803#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/fivemor.com\/?p=98803\",\"url\":\"https:\/\/fivemor.com\/?p=98803\",\"name\":\"Bankruptcy v. Debt Settlement \u2014 Ernest G. Ianetti, Esq. - Som2ny Network\",\"isPartOf\":{\"@id\":\"https:\/\/fivemor.com\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/fivemor.com\/?p=98803#primaryimage\"},\"image\":{\"@id\":\"https:\/\/fivemor.com\/?p=98803#primaryimage\"},\"thumbnailUrl\":\"https:\/\/fivemor.com\/wp-content\/uploads\/2025\/02\/1740030268_format1500w.jpeg\",\"datePublished\":\"2025-02-20T05:44:25+00:00\",\"breadcrumb\":{\"@id\":\"https:\/\/fivemor.com\/?p=98803#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/fivemor.com\/?p=98803\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/fivemor.com\/?p=98803#primaryimage\",\"url\":\"https:\/\/fivemor.com\/wp-content\/uploads\/2025\/02\/1740030268_format1500w.jpeg\",\"contentUrl\":\"https:\/\/fivemor.com\/wp-content\/uploads\/2025\/02\/1740030268_format1500w.jpeg\",\"width\":1500,\"height\":1000},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/fivemor.com\/?p=98803#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/fivemor.com\/?bp_activities=1\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Bankruptcy v. Debt Settlement \u2014 Ernest G. Ianetti, Esq.\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/fivemor.com\/#website\",\"url\":\"https:\/\/fivemor.com\/\",\"name\":\"Som2ny Network\",\"description\":\"Daily Deals\",\"publisher\":{\"@id\":\"https:\/\/fivemor.com\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/fivemor.com\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/fivemor.com\/#organization\",\"name\":\"Som2ny Network\",\"url\":\"https:\/\/fivemor.com\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/fivemor.com\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/fivemor.com\/wp-content\/uploads\/2026\/07\/4a0953c4-logo-300x86-1.png\",\"contentUrl\":\"https:\/\/fivemor.com\/wp-content\/uploads\/2026\/07\/4a0953c4-logo-300x86-1.png\",\"width\":300,\"height\":86,\"caption\":\"Som2ny Network\"},\"image\":{\"@id\":\"https:\/\/fivemor.com\/#\/schema\/logo\/image\/\"}},{\"@type\":\"Person\",\"@id\":\"https:\/\/fivemor.com\/#\/schema\/person\/b85e3c3dc0e1daea076524dc8810c371\",\"name\":\"admin\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/fivemor.com\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/729ae85bf62b9917e93538db2f2688ca?s=96&r=g&default=https%3A%2F%2Ffivemor.com%2Fwp-content%2Fplugins%2Fbuddypress-first-letter-avatar%2Fimages%2Fdefault%2F96%2Flatin_a.png\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/729ae85bf62b9917e93538db2f2688ca?s=96&r=g&default=https%3A%2F%2Ffivemor.com%2Fwp-content%2Fplugins%2Fbuddypress-first-letter-avatar%2Fimages%2Fdefault%2F96%2Flatin_a.png\",\"caption\":\"admin\"},\"sameAs\":[\"https:\/\/fivemor.com\"],\"url\":\"https:\/\/fivemor.com\/?author=1\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Bankruptcy v. Debt Settlement \u2014 Ernest G. Ianetti, Esq. - Som2ny Network","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/fivemor.com\/?p=98803","og_locale":"en_US","og_type":"article","og_title":"Bankruptcy v. Debt Settlement \u2014 Ernest G. Ianetti, Esq. - Som2ny Network","og_description":"Typically debt-settlement is an alternative to filing bankruptcy. But, the debt settlement approach to getting out of debt is risky. Some creditors may not agree to settle, and they may sue to collect the debt you owe. Also, there is no guarantee the DSC you hire will succeed. How Does Debt Settlement Work? To start […]","og_url":"https:\/\/fivemor.com\/?p=98803","og_site_name":"Som2ny Network","article_published_time":"2025-02-20T05:44:25+00:00","og_image":[{"width":1500,"height":1000,"url":"https:\/\/fivemor.com\/wp-content\/uploads\/2025\/02\/1740030268_format1500w.jpeg","type":"image\/jpeg"}],"author":"admin","twitter_card":"summary_large_image","twitter_misc":{"Written by":"admin","Est. reading time":"4 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/fivemor.com\/?p=98803#article","isPartOf":{"@id":"https:\/\/fivemor.com\/?p=98803"},"author":{"name":"admin","@id":"https:\/\/fivemor.com\/#\/schema\/person\/b85e3c3dc0e1daea076524dc8810c371"},"headline":"Bankruptcy v. Debt Settlement \u2014 Ernest G. Ianetti, Esq.","datePublished":"2025-02-20T05:44:25+00:00","mainEntityOfPage":{"@id":"https:\/\/fivemor.com\/?p=98803"},"wordCount":805,"commentCount":0,"publisher":{"@id":"https:\/\/fivemor.com\/#organization"},"image":{"@id":"https:\/\/fivemor.com\/?p=98803#primaryimage"},"thumbnailUrl":"https:\/\/fivemor.com\/wp-content\/uploads\/2025\/02\/1740030268_format1500w.jpeg","keywords":["bankruptcy","Debt","Ernest","Esq","Ianetti","Settlement"],"articleSection":["Legal"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/fivemor.com\/?p=98803#respond"]}]},{"@type":"WebPage","@id":"https:\/\/fivemor.com\/?p=98803","url":"https:\/\/fivemor.com\/?p=98803","name":"Bankruptcy v. Debt Settlement \u2014 Ernest G. Ianetti, Esq. - Som2ny Network","isPartOf":{"@id":"https:\/\/fivemor.com\/#website"},"primaryImageOfPage":{"@id":"https:\/\/fivemor.com\/?p=98803#primaryimage"},"image":{"@id":"https:\/\/fivemor.com\/?p=98803#primaryimage"},"thumbnailUrl":"https:\/\/fivemor.com\/wp-content\/uploads\/2025\/02\/1740030268_format1500w.jpeg","datePublished":"2025-02-20T05:44:25+00:00","breadcrumb":{"@id":"https:\/\/fivemor.com\/?p=98803#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/fivemor.com\/?p=98803"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/fivemor.com\/?p=98803#primaryimage","url":"https:\/\/fivemor.com\/wp-content\/uploads\/2025\/02\/1740030268_format1500w.jpeg","contentUrl":"https:\/\/fivemor.com\/wp-content\/uploads\/2025\/02\/1740030268_format1500w.jpeg","width":1500,"height":1000},{"@type":"BreadcrumbList","@id":"https:\/\/fivemor.com\/?p=98803#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/fivemor.com\/?bp_activities=1"},{"@type":"ListItem","position":2,"name":"Bankruptcy v. Debt Settlement \u2014 Ernest G. Ianetti, Esq."}]},{"@type":"WebSite","@id":"https:\/\/fivemor.com\/#website","url":"https:\/\/fivemor.com\/","name":"Som2ny Network","description":"Daily Deals","publisher":{"@id":"https:\/\/fivemor.com\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/fivemor.com\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/fivemor.com\/#organization","name":"Som2ny Network","url":"https:\/\/fivemor.com\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/fivemor.com\/#\/schema\/logo\/image\/","url":"https:\/\/fivemor.com\/wp-content\/uploads\/2026\/07\/4a0953c4-logo-300x86-1.png","contentUrl":"https:\/\/fivemor.com\/wp-content\/uploads\/2026\/07\/4a0953c4-logo-300x86-1.png","width":300,"height":86,"caption":"Som2ny Network"},"image":{"@id":"https:\/\/fivemor.com\/#\/schema\/logo\/image\/"}},{"@type":"Person","@id":"https:\/\/fivemor.com\/#\/schema\/person\/b85e3c3dc0e1daea076524dc8810c371","name":"admin","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/fivemor.com\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/729ae85bf62b9917e93538db2f2688ca?s=96&r=g&default=https%3A%2F%2Ffivemor.com%2Fwp-content%2Fplugins%2Fbuddypress-first-letter-avatar%2Fimages%2Fdefault%2F96%2Flatin_a.png","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/729ae85bf62b9917e93538db2f2688ca?s=96&r=g&default=https%3A%2F%2Ffivemor.com%2Fwp-content%2Fplugins%2Fbuddypress-first-letter-avatar%2Fimages%2Fdefault%2F96%2Flatin_a.png","caption":"admin"},"sameAs":["https:\/\/fivemor.com"],"url":"https:\/\/fivemor.com\/?author=1"}]}},"_links":{"self":[{"href":"https:\/\/fivemor.com\/index.php?rest_route=\/wp\/v2\/posts\/98803","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fivemor.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fivemor.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fivemor.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/fivemor.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=98803"}],"version-history":[{"count":0,"href":"https:\/\/fivemor.com\/index.php?rest_route=\/wp\/v2\/posts\/98803\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/fivemor.com\/index.php?rest_route=\/wp\/v2\/media\/98804"}],"wp:attachment":[{"href":"https:\/\/fivemor.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=98803"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fivemor.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=98803"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fivemor.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=98803"},{"taxonomy":"dealstore","embeddable":true,"href":"https:\/\/fivemor.com\/index.php?rest_route=%2Fwp%2Fv2%2Fdealstore&post=98803"},{"taxonomy":"offerexpiration","embeddable":true,"href":"https:\/\/fivemor.com\/index.php?rest_route=%2Fwp%2Fv2%2Fofferexpiration&post=98803"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
![](\"https:\/\/images.squarespace-cdn.com\/content\/v1\/5e9b329a104f3437f8319fd9\/1593726719891-RX4270169I4VYURNK9XT\/image-asset.jpeg?format=1500w\")
<\/p>\n