Chapter 7 Bankruptcy lingers on credit reports for 10 years, whereas debts that were settled (charged-off) may stay on credit reports for 7 years.

Due to new laws, many states already require 'credit counseling' prior to filing bankruptcy. Debt settlement does not have any such pre-requirements.

These new laws were enacted as an effort to reduce defaulted debt by forcing people to seek credit counseling first. But, consumers who are desperate and deep in debt may simply opt to default entirely on their debts.

With debt settlement, consumers can significantly reduce their outstanding debt instead of completely defaulting.

Some is better than none? It's not uncommon for creditors to accept a debt settlement offer, even up to half of what is owed. Consumers confident in their negotiation skills can actually settle debts for less on their own. For those conusmers who want professional help on their behalf, a debt settlement company generally requires the consumer to have a minimum of $10,000 in unsecured debt. Unsecured debt typically includes: credit cards, payday loans, personal loans, and some companies will also negotiate medical and legal bills.

Credit Counseling, the preferred choice of creditors, is a repayment plan for all outstanding debt. It does not reduce the amount of debt owed, it merely combines all debts into a monthly payment plan to fit the consumer's budget. Although it is not a 'charge-off', it still can impact credit scores, albeit to a lesser degree than debt settlement, and at far lesser degree than bankruptcy. Some creditors will not issue new lines of credit to consumers enrolled in a credit counseling (also called debt management) program. And certainly most won't even consider offering credit to consumers with an undischarged bankruptcy on their credit reports.

In the long run, bankruptcy filing has the worst impact on credit scores, followed by debt settlement, and lastly credit counseling. But debt settlement can get consumers out of debt much faster and is often the easiest course of action.

Submit an online application for professional credit counseling or for debt settlement at Credit Federal today.