In cases where an individual or company is facing overwhelming debt, several options are available. In some cases, a Connecticut resident might be offered the opportunity for debt settlement, a process wherein the creditor agrees to forgive portions of the debt in exchange for a mandated payment schedule. While this can have its benefits, it does not preclude Chapter 7 bankruptcy as an option for those who are unable to meet these requirements.
Once upon a time, some creditors would use debt settlement as a way of selling off the excess debt to a collections agency, meaning the debtor would still be required to pay back the full amount between two different organizations. This is less common today, and when offered debt settlement solutions, some individuals may find it beneficial to take that opportunity. This is not true if the debtor is unable to meet the minimum payment requirements.
For example, if an individual accrues a large amount of credit card debt, and the company offers debt settlement as a solution but requires the individual to pay $200 a month, this could sound like a workable solution. If the debtor is in financial straits to the point where he or she is unable to meet that responsibility, Chapter 7 bankruptcy might be a better solution. Bankruptcy, while it may sound like a more extreme solution, allows some debt to be forgiven and can make use of personal assets to pay down creditors.
Chapter 7 bankruptcy is an effective solution for extreme debt. Connecticut residents who choose this route will work in tandem with a trustee appointed by the U.S. Bankruptcy Court to dissolve assets and pay down creditors. This can provide valuable peace of mind to those suffering from crippling debt problems.
Source: LA Times, "Debt settlement vs. filing for bankruptcy: Pros and cons", Liz Weston, Oct. 1, 2017