In 2005 there was a modification in the bankruptcy legislation. This reform changed the laws making it much harder for a person to file Chapter 7. This is an entire discharge of the debt owed. If someone dosen't pass the "means test" to be excepted for Chapter 7 then they must look to go through what's called a Chapter 13. With a Chapter 13 the court will assess your entire financial situation to figure out how much you will have to pay back towards your debts within the next 5 years.

So evidently a Chapter 13 is not as lucrative of an offer as a 7. This forces many people away from filing bankruptcy to look for other systems of credit card debt relief. One of the popular and more attractive methods then becomes credit card debt settlement.

This is a system in which one must fall past due on their debts' while saving up the necessary money on the side, to then negotiate a one time settlement, at a much lowered amount from the balance owed. While debt settlement does have a temporary harmful effect on someone's credit, it is not anywhere near as bad as bankruptcy. Plus debt settlement is not by any means a public record, however a bankruptcy will be a public record for the rest of the persons life.

A debtor can expect to save themselves around 50% of what the debt was initially. And look to have themselves become freed from the prison of debt within a matter of two to three years for some much sooner. Obviously making credit card debt settlement a much more attractive proposal than a Chapter 13 bankruptcy.

The fact that in many situations debtors will end up saving more money with debt settlement, is almost reason enough. But then toss in the fact that it will take at most three years. When in comparison to a Chapter 13 bankruptcy that will take five. Plus settlement being a private issue and not a publicly known record for the rest of your life, as with a bankruptcy. Then there is your credit rating, debt settlement comes off as being a lot better than bankruptcy.

There are three ways that a debtor can go about settling their debts. First off you can do it yourself, which is to a great extent advised against if you do not know what you are doing. If someone cant do it themselves then a debt settlement company can be hired to help settle someone's debts. There are many honest debt settlement companies however one must do research on a company to make sure they are reputable and honest. Then you can contact a debt settlement attorney as well. You can get more security using a law firm, and the majority of the time they can work out lower settlements as well. And being that lawyers must be active members of their States Bar Association you get the further protection in knowing that they must account to a higher power. There are far less unethical operations that are law firms then debt settlement companies.

Joe Rodgers is a debt analyst with the US Consumer Advocate, which practices debt relief.