The first thing to decide between bankruptcy and debt negotiation is which is best for you? Another important aspect is how will it affect your credit score. If your credit score has already been affected by your circumstances then Chapter 7 bankruptcy may be the best way to go.

Bankruptcy

Filing for Chapter 7 bankruptcy is where your debts are forgiven and you start with a clean slate. The downside is that it will remain on your credit score for 10 years from the date of discharge. However, your credit score will have already been affected by delinquent payments. This will cause problems for you as you try to re-establish your credit, which will more than likely be at a much higher interest rate. In seeking insurance, an insurance company may charge you a higher premium as well. If you are in need of employment, bankruptcy may have an adverse affect in this area too. Many employers make their decisions for hiring or promoting based on a person's credit report. Also, if you own your own home this is generally a protected asset but be aware that if you sell the home proceeds could be fair game for any creditor.

Debt Negotiation

Debt negotiation may have the least negative effect for you in the long run.

Debt negotiation requires you to get in touch with your creditors and explain your situation. If you have been unemployed, but have just recently been hired, then ask your creditors to place you on a "Hardship Program." This is a debt negotiation plan where you agree to pay your creditors based on your paycheck. Plan out how much you can afford to pay each creditor before contacting them so they know you have a plan of action. Some creditors may not be willing to work with you. If this is the case, a certified debt counselor or debt negotiation firm can assist you. Once you have established an agreement make sure all payments are made on time.

If your payments are more than 90 days old you may be able to make an agreement with creditors to repay for less than you owe. However, it isn't recommended that you wait for this to happen. Interest charges and late fees will be continuing to accrue during this time.

The choice between bankruptcy or debt negotiation depends on weighing the pros and cons of both and then deciding what is right in your situation.

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Author Resource BoxThe Author has good experience in the finance field, who writes on various related topics such as debt settlement & debt consolidation to help people understand the Debt Settlement process and help them save their home from foreclosure.Read Fred Esterly Profile

The Author has vast experience in the finance field, who like to write on the finace related topics. He had written a lot of useful article on debt negotiation, debt settlement, debt relief etc. He has reviewed a lot of useful information on debt settlement in his blog : http://debt-settlement-resource.blogspot.com/