If your financial situation has gotten so bad that you are actively considering filing for bankruptcy then you must know that there are other options available to you that will not destroy your credit history for a decade or more. You owe it to yourself to uncover the facts and give yourself the best chance possible of becoming debt-free while minimizing the negative impact on your credit rating.

Consolidation debt settlement can come in two forms. The first is by offering your creditors a lump sum payment that is a percentage of what is owed to retire the debt. An example of this would be if you were to owe a credit card company $8000 they would agree to accept $4500 and then close out your account. There are some creditors that will be willing to do this because they realize something is better than nothing.

Another way to take advantage of a debt consolidation service is to have them negotiate with your creditors on your behalf. The advantage here is that these companies already have a working relationship with creditors and they will usually be successful in negotiating lower interest rates and thereby making your monthly payments more affordable.

This form of consolidation debt settlement will have you free of debt in a period of 4 to 5 years. You will make one lump sum payment to the debt consolidation company every month and they will then distribute your payments to your creditors according to what is owed and previously agreed upon. These accounts will also be closed down while they are being paid off.

When all is said and done you will have your debts paid off, and while your credit rating will more than likely temporarily have negative marks on it, it will not be anywhere near as devastating for you credit-wise as would filing for bankruptcy. If you were to file for bankruptcy then you could pretty much forget about applying for a mortgage, auto loan, credit card and just about any other form of credit.

That is the advantage of consolidation debt settlement over bankruptcy. It shows the reporting credit agencies that you are actually taking responsibility for your debts and are not trying to get out of them without paying. There is a reward for being responsible, just as there are repercussions for being financially irresponsible.