Bankruptcy Or Settling On Bad Debt Charge-offs?
Which is more damaging to ones character: Filing for bankruptcy after several bad debt charge-offs; or settling on the bad debt charge-offs and not filing for bankruptcy. Which one is perceived as more responsible? Seems to me that not filing for bankruptcy leaves the door open to be accused of being a deadbeat while filing for bankruptcy appears as if circumstances were beyond my control. What are your thoughts? Thanks!
Answer:
There's no black-and-white answer. Different creditors look at things differently. Here in the US, once your bankruptcy is discharged, you are deluged with pre-approved credit cards, can get a car loan immediately (albeit at a high interest rate), and most people can get mortgage loans in 2 years or sooner. How a creditor would look at it may depend on what kind of "credit" you are are looking for. Trying to buy a house? Buy a car? Just rent a house? How you got into your situation may make a difference to someone that is actually analyzing your credit, as opposed to a computer scoring evaluation. Are your problems related to credit cards? A failed business? Medical expenses? Some will hold out-of-control credit card debt or credit card related bankruptcy aginst you a lot harder than one related to something like catastophic medical expenses, etc. All depends.... I've worked in credit for over a decade. Different finance companies have different rules as do the credit card issuers...BUT...a bankruptcy will scare off most creditors and it stays on your record for 10 years. The settled charge-offs show an attempt to clear the debt without BK and stays on your record for 7 years. If you are dealing with a person and not a scoring machine, you probably have the better chance of getting credit with the settled accounts as opposed to the BK in my experience. But either way, both are derogatory marks on your credit bureau report. It's probably going to save you money to file BK instead of settling a large number of accounts, but the mark is going to stay 3 extra years. You have to decide which is the lesser of two evils.
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