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Wisconsin is a beautiful state of farms set among rolling hills. It has retained a strong economy which, despite wide losses to the U.S. manufacturing sector, has still managed to maintain 20% of its total output in manufacturing, making it the third state most reliant on that sector.

Its economy is also heavily reliant on food and food service jobs as well as construction. Healthcare makes up a large amount of the state’s total industry as well.

Overall, Wisconsin has one of the lowest unemployment rates of any state in the U.S. Despite this, it had one of the higher bankruptcy rates of any state, ranking 11th in 2015. While Wisconsin has relatively favorable bankruptcy laws, for those Wisconsin residents in financial distress, there may be better alternatives than Chapter 7.

Debt settlement can often prove to be a good compromise between debt consolidation and Chapter 7. While it’s not usually possible for someone to completely settle debts without getting at least some adverse marks on their credit history, it may be possible to get rid of those debts through settlements while only mildly affecting their credit score. The alternative, Chapter 7, will often leave the debtor financially crippled for a decade or more, unable to get a mortgage, auto loan or any kind of small business financing.

Who can debt settlement work for?

Debt settlement is often the best course of action for those who still have some income but not enough to pay off their debts completely within three to five years by using debt consolidation. If the debtor has severely reduced income or no income, then it may still be best to declare Chapter 7 bankruptcy. But there are many compelling reasons to avoid this route, if at all possible.

Chapter 7 will result in a note of bankruptcy on a person’s credit report for at least seven to ten years. This will make it almost impossible for them to get any kind of unsecured loan. It will also make it difficult to get or keep some jobs, and the government will likely revoke any security clearance that the individual may have. Perhaps worst is the rarely mentioned fact that if many of the creditors are local, declaring bankruptcy may produce ill feelings for years to come. Once the court has ruled that the bankruptcy will proceed, creditors lose everything they have lent. In many cases, this has led debtors who have entered bankruptcy to enduring extreme embarrassment, even driving them to move far away from the communities in which they had sunken roots.

Debt settlement can avoid most of these undesirable outcomes. In most cases with debt settlement, the debtor’s credit rating will be reduced by 50-100 points. But this can be quickly restored through judicious credit building and is nothing compared to the lasting consequences of a bankruptcy note on a credit history.

That said, debt settlement is usually only useful to eliminate the same kinds of debts generally targeted with debt consolidation, namely, private, unsecured debt not backed by the government. Debt such as student loans cannot typically be settled. Court ordered debt, such as child support, alimony or restitution can never be settled. Any company claiming to be able to eliminate these types of debts should be approached with extreme caution.

But there are other red flags that may be hints that a debt settlement company is not fully above board. Debt settlement companies are barred, by FTC regulations, from charging any kind of fee prior to the resolution of the debt. Also, legitimate debt settlement companies will only use FDIC-insured escrow accounts. You should not do business with any company claiming to settle debts that requires up front payments or payments that are made without being backed by an FDIC-insured escrow service.

One alternative to debt settlement is debt consolidation. Under debt consolidation, a loan is taken out which allows higher interest debts to be paid off immediately. This trades reduced interest rates and, sometimes, reduced principal amounts for the debt being secured, often times through a home equity line of credit. Debt consolidation can be an excellent way to quickly exit debt but only for those who have sufficient income relative to the amount owed. If the debtors income is insufficient, debt consolidation can become a terrible mistake.

If the debtor still has some income but not enough to pay down his debts within a reasonable time frame, debt settlement becomes much more attractive. With debt settlement, the debtor is trading markedly reduced principal amounts for a voluntary default on his loans and the 50 to 100 point hit to his credit rating that comes with it. He also will likely have some non-payment notes on his credit history.

But this is a small price to pay if bankruptcy can be avoided. Because debt settlement can save debtors tens of thousands of dollars while allowing them to avoid bankruptcy, it’s an option well worth pursuing for those who cannot reasonably expect to quickly exit debt through consolidation.