Debt has become a major issue in the life of the Americans. In order to resolve this problem the two most valuable results are either debt settlement company or filing bankruptcy. But before you opt for any one of the above mentioned programs you need to know the advantages and disadvantages that would help you to choose the right kind of plan that would suit your pocket.

Determine the depth of your debt:

1) Demand a copy of your credit report from the credit card companies.

2) Recheck the information provided on the statement of the credit card companies. Search for any incorrect entries regarding personal information, account which are not liable to you and even accounts which are actually paid in full but showing an out standing balance.

3) Keep a record of the credit score which is also known as Fair Issac Credit Organization (FICO) score. FICO has been named after a software that calculates the credit score. The average FICO score on the ascending side is 500.

4) Add up all the balances that are due from your credit accounts, loans, both the secured and unsecured loans and also include the collection account.

All these information would help you to decide to make a choice between a debt settlement program and filing for bankruptcy.

Keep a check on the monthly finances:

Prepare a spread sheet where you can incorporate all the credit information regarding the income and expenditure. If you file for bankruptcy you have to present the average monthly income and that too before 6 months filing for bankruptcy petition. In both the cases debt settlement program or filing bankruptcy requires the calculation of the monthly income. Make a separate spreadsheet for the monthly expenses like groceries, insurance, education related cost and so on.

Now subtract the total amount of expenditure from the total amount of income, the amount which would be left can be used to repay the debts you have incurred. If you have a zero balance or negative balance then it shows that you cannot afford to pay off the debt.

How do you know that debt settlement is right for you?

• See if you can pay off your debt with the current income. If your income is less then the amount of your expenses then be sure that debt settlement program is not a good solution for you. It won’t be able to deliver you out of this financial crisis. If your monthly income is more than your expenditure then the debt settlement company can guide you with debt solutions
• Calculate the total amount of credit card debt you owe and find out whether you qualify to enroll for a debt settlement service. Choose a debt settlement company according to the total amount you owe as each company varies the credit card balance requirement.
• Choose a reliable debt settlement company. Avoid the companies which charge a huge up front fee. Choose the debt settlement companies which are accredited by Better Business Bureau. And ensure that the fee they are charging are affordable for your pocket.
• Prepare yourself regarding the negative aspect that surrounds a debt settlement company such as creditors call, damaged credit record and tax problems.

How do you know bankruptcy is right for you?

• Look for other option other than bankruptcy if that can pull you out from the financial catastrophe. On line search can give innumerable options like debt settlement programs, debt management programs and so on.
• Do you qualify for filing bankruptcy? Just search for bankruptcy code on line and there are even books which can explain the bankruptcy in much easier way. Hire a bankruptcy attorney who can give you an able guidance and make you aware whether you qualify filing for bankruptcy or not.
• There are many chapters in filing for bankruptcy see in which chapter you qualify before filing for bankruptcy read through the rules and guidelines associated with each of the chapters.
• Keep it in mind that bankruptcy remains on your credit record for a long time, So if you file for bankruptcy you should prepare your self that you are going to ruin the credit record for next seven years.

So it’s your call to choose the right plan for you which would help you to burden you from the horrid night mare of debt.