If you have a large amount of debt, you may be considering several options, including debt settlement and bankruptcy. Let’s look at some of the positive and negatives when choosing between debt settlement versus bankruptcy. The first step in deciding between debt settlement and bankruptcy is determining whether you can pay down your debts with your current income. If you can pay down your debts with your current income (or increase your earned income), then debt settlement may be the best option for you.

The next step is determining if qualify for debt settlement. To qualify for debt settlement, you will typically need to have at least $7,500 in unsecured debt. Be sure to ask each debt settlement company that you talk to about the minimum debt balance requirements. Some companies have higher minimums than others. Look for debt settlement companies that have good ratings with the Better Business Bureau, and avoid companies that charge large upfront fees. Also, look for debt settlement companies that have a strong history of negotiating with creditors. Ask for references and compare the services that each company offers.

If you decide to pursue debt settlement, make sure you are prepared for the potential negatives. Some of these include possible collection lawsuits from creditors, damaged credit, and increased creditor phone calls. If you can’t handle these possibilities, then another option is probably the best solution for you. Likewise, if you cannot pay off your debt with your current income (or increase your earned income), then bankruptcy may be a better solution for you.

If you’re considering bankruptcy, it’s important to determine whether it will resolve your credit problems. Depending on the amount and type of debt you have, a bankruptcy may not erase your responsibility to pay your bills. Bankruptcy is typically less expensive than debt settlement. However, the consequences of a bankruptcy are terrible for your credit score. Debt settlement doesn’t affect your credit score to the same extent as bankruptcy, though a credit score drop is probable. A bankruptcy can remain on your credit report for up to 10 years, but bad debt is only allowed to remain for 7 years.

Both debt settlement and bankruptcy can be good solutions to debt problems. Talk with your attorney to determine the best solution for your needs.