The recent change in the bankruptcy law has made it difficult for people to qualify for chapter 7 bankruptcy.
Chapter 7 helps a debtor to wipe out all his debts.
Even though this method has a major negative impact on the debtor's credit report for the next 10 years, a lot of debtors used to take up this option to counter their debts.
In order to discourage this attitude amongst debtors and to protect the rights of the creditors these changes have been introduced.
Now a debtor has to take a means test if his income is above the median income of his test.
Only if he qualifies in this test, he is eligible for chapter 7 bankruptcy.
Those who do not qualify under chapter 7 but are still interested in filing for bankruptcy will be forced to opt for chapter 13.
This method aims at giving relief to debtors through repayment plans and credit counselling.
Under chapter 13, the debtor has to pay off his debts within a certain stipulated time frame.
With these changes in bankruptcy laws, most debtors do not find bankruptcy as a viable option for debt relief.
However, there are other options which have been adopted by debtors to come out of debt and end up will lesser damage to the credit rating.
Debt settlement is one such option which helps debtors in reducing their debt by as much as 50 %.
This is a legal method in which the debtor and the creditor agree to settle the account for a reduced amount of money.
In standard cases, the debtor needs to pay off the remaining amount to the creditor in one single down payment.
Payment through monthly instalments is also an option but it needs to be agreed upon at the time of negotiation.