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Difference between debt relief companies and bankruptcy

Desperate debtors often grasp at straws in order to get out from under massive piles of bills they can no longer afford to pay. While that may be understandable, it might not be the most prudent course of action to take.

Debt relief companies target consumers who are struggling to repay their debts. While there are legitimate companies out there designed to help consumers regain control of their finances, there are also plenty of others that do not serve the debtors' best interests.

Purpose of debt relief companies

On the surface, all of these companies purport to help consumers settle their debts for less than the full amount. In actuality, however, this is something that every consumer has the ability to do on his or her own.

There is no need to pay a company to negotiate with your creditors. Companies engage in these type of debt negotiations with consumers every day. They realize that accepting something is far better than getting nothing, and will usually agree to knock hundreds, if not thousands, off of accounts as long as payment is forthcoming.

When the debt isn't truly settled

Another problem of paying a company to settle your debt is that you have no guarantee that your debt will be wiped out this way. Consumers often are stunned to discover that purportedly "settled" debts are still dragging along behind them after they believed the slate was wiped clean.

Bankruptcy only true path to a clean debt slate

Debt negotiation can only do so much. In agreeing to eliminate a certain percentage of a consumer's debt, companies typically insist on receiving the balance in a lump-sum payment. It can be argued that if debtors had those amounts of money at their disposal, they may not have landed in such financial hot water.

If you find yourself in untenable fiscal circumstances, it may be time to take a good, hard look at your financial situation.

Nobody wants to file for bankruptcy, and despite some more enlightened views on the matter, the fact is that filing for bankruptcy still retains some negative connotations. There are drawbacks to bankruptcy, but few are as severe as neglecting to do anything about the financial quagmire in which you find yourself stuck.

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