There is a major difference between negotiating your debt with a financial advisor/counselor and filing for bankruptcy.  Filing for bankruptcy must always remain a last resort and be considered thoroughly before initiated. These are very similar acts in the respect that they help you get out of great debt.  However, there are many differences to filing for bankruptcy versus negotiating your debt with a credit counselor.  

Negotiating with a Debt Counselor

You should initially attempt to negotiate your debt with a counselor first and foremost. If that fails, then consider bankruptcy.  As for negotiating with a credit counselor, you are in entire control of your finances and debt, such as how quickly and how much debt you rid yourself of. Your matters will be private with a credit counselor.

Negative items can remain on your credit report for up to seven years, although you can be back on track with credit options in as little as a year, depending on ability to pay reduced settlements. As for the remaining balance of your debt, you may be able to settle up to an average of 30% to 50% of the debt balance. 

Negotiating any amount of debt with a credit counselor is the best decision and action to make. From there, if you and your counselor feel filing for bankruptcy may be the best thing for you and your financial situation, then consider the risks and impacts of filing for bankruptcy.

Bankruptcy

Bankruptcy is a public matter and takes an average of five years to be completed. As well, once you go to the court, you lose all control of your financial problems and all decisions are made by the court.  At the same time though, the court can protect you from lawsuits. If you were to file for Chapter 7 bankruptcy, you will first need to participate in a court approved credit counseling program for six months prior before you can even file your case.

Bankruptcy does not only take a long time to initiate and then complete, but it will also follow you for many years after. Bankruptcy remains on your credit for ten years, and it may effect you even longer for certain employment and loan qualifications.

As for the overall remaining balance of your debt, bankruptcy will allow creditors to see 25% to 50% of original balances over a five year period. Dealing with debt is an expensive issue, especially when you take on filing for bankruptcy. You should expect to pay around $1,500.00 for legal fees and court costs, with additional costs for an attorney that specializes in bankruptcy. You should only accept an attorney that initially offers free consultations.