What's better for credit card debt? Bankruptcy or debt settlement?

I won't say that one is better than the other, only that bankruptcy offers far more options as well as protection from the US Bankruptcy Court. Here is a basic breakdown of both:

Credit Card Debt Settlement

Debt settlement is handled outside of the court system, and offers a way for an attorney to give their client a way out of credit card debt by negotiating a smaller settlement amount to get rid of the creditors claim. It works by establishing a trust fund, and having the client pay monthly payments into that, instead of credit card payments, in order to build up a lump sum of cash.

The downside is, this process can take between 6-18 months, during which time the credit card company is not being paid. Sooner or later they will bring lawsuits against you to get their money. Your attorney will need to delay and defend the lawsuits long enough for your trust fund to build up sufficient cash.

Once there is enough money, your attorney will attempt to "settle" the creditors’ claims by offering a sum of cash, usually about 30-40% of what is actually owed. It's really up to the credit card companies to accept the settlement or continue pursuing legal action.

If they do accept, the claim is dropped, however, there could be a very large impact on your credit due to the fact that debt was "forgiven", that is, you became uncollectible.

Bankruptcy

Bankruptcy is handled through the court system, and your attorney will determine the best chapter to file based on your financial situation. Generally, the most common type of bankruptcy is chapter 7. In this case, a trustee will determine what debts can be repaid by liquidating your available, "non-exempt" assets. The vast majority of people will not lose any property, because the exemptions are usually large enough to cover equity in a home and a car. The rest of the property that becomes part of the bankruptcy estate is usually not worth selling, because it's not worth enough, or it would be too difficult for the trustee to sell.

A chapter 13 bankruptcy is better for debtors who have a reasonable regular income, as well as those who wish to save a home from foreclosure and modify a mortgage loan. In a chapter 13 case, you and your attorney will take your disposable monthly income to determine how much you could comfortably afford to pay monthly. Out of this monthly payment, your secured creditors get paid first, such as a car loan and mortgage, and if there is any money left, then unsecured creditors get paid. In most cases, the monthly payments will be only pennies of what would have to be paid outside of bankruptcy.

The main benefit of bankruptcy is that the debtor is protected from legal actions by creditors. Credit card companies can't sue you. They can't even call or contact you.

Talk to a Lawyer about bankruptcy and debt settlement. That is the only way to get real, solid legal and financial advice regarding both options and which would be better for your particular case.

Good Luck.