When it comes to bankruptcy vs. debt management it's not always easy to decide which is the better option. If your debts are out-of-control you might wonder whether filing for a Chapter 13 or Chapter 7 bankruptcy will resolve your financial problems or if you are better off opting for a debt management program.

Can using a debt counseling service help or harm your financial situation? While making use of a debt management service does not always put you in the best light it does look better than a bankruptcy. As far as bankruptcy vs. debt management is concerned it does make more sense to try credit counseling first. Bankruptcy should always be seen as a last resort.

A creditor will use your FICO score to determine your risk profile. The FICO score is made up of a variety of factors and may be influenced positively or negatively by credit counseling. It depends on each individual creditor. So bankruptcy vs. debt management might not be the best option.

Several credit counseling agencies don't actually report counseling to the credit bureau. So it's always worthwhile asking before choosing one. As far as bankruptcy vs. debt management payment plans, even if a creditor reports this to a credit agency it still looks better than a bankruptcy filing.

So how does bankruptcy vs. debt management influence the outcome of your financial status? When you enter a debt management plan you must pay your creditors 100% of what you owe them (you might be granted an interest rate concession). If you file a Chapter 13 bankruptcy you might repay only a percentage of the debt or you might have to repay it in full.

Bankruptcy vs. debt management does have pros and cons. If you choose to file a Chapter 7 bankruptcy most of your debts will be forgiven. Your assets might be sold to repay the debts where this is possible. If you enter a debt management plan you will retain all your assets.

If you enter a debt management plan you will very likely be granted further credit after you have repaid your debts. An important consideration of bankruptcy vs. debt management is that in bankruptcy you may find it very hard to obtain credit and will pay higher interest rates. Under a debt management plan your creditors might report your account as "slow pay" or "not paying as agreed". This will reflect better on your credit rating.

A further consideration surrounding bankruptcy vs. debt management is that a bankruptcy will remain on your credit rating for ten years. Information from your creditors has a shelf-life of only seven years. Be aware that a debt management plan will not put an end to legal action by a creditor. On the other hand bankruptcy prevents legal action.

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