Debt Settlement vs Bankruptcy: Federal Guidelines
By Federal Trade Commission | 9 min read
Understand debt relief options with FTC guidance. Debt settlement, bankruptcy, and credit counseling alternatives.
The FTC provides guidance on debt relief options. Debt settlement involves negotiating with creditors to pay less than owed, but can damage credit and may result in taxable income. Bankruptcy provides legal protection but severely impacts credit for 7-10 years. Before considering either option: Contact nonprofit credit counseling agencies (required before bankruptcy), Explore payment plans with creditors, Consider debt management plans through accredited counselors.\n\n**Related Resources**\n- [Financial Planning Tools](/tools)\n- [Budget Calculator](/budget-planner)\n- [Credit Guide](/category/Debt%20%26%20Credit)\n- [Money Saving Tips](/category/Save%20Money)