Liability

• If a debtor agrees to a contract with a debt negotiation company, the debtor is still liable for all outstanding debt. The company will charge an additional fee for its services, but it does not become legally responsible for any of the debtor's liabilities. According to the state of Montana, some debt negotiation companies tell the debtor to stop making payments on overdue bills, which will harm the debtor's credit score and lead to other consequences.
  
  

Court Powers

• A bankruptcy court has stronger powers over creditors than a debt negotiation company. The creditor does not have to agree to a contract with a debt negotiation company since its existing contract is with the debtor. A bankruptcy court can force a creditor to participate in the bankruptcy court process, including forcing the creditor to negotiate with other creditors who also have valid claims, and can legally reduce the amount of debt that the debtor must repay the creditor.
  
  

Debt Negotiator Powers

• A debt negotiation company cannot prevent a creditor from filing a lawsuit, or other legal actions such as liens and repossessions. It cannot stop either private creditors or government creditors from calling the debtor to collect on a valid debt, and the Federal Trade Commission sues debt negotiation companies that make these types of promises.
  
  

Time Restriction

• Bankruptcy is time restricted. Depending on the type of bankruptcy case, the court will not discharge an individual's debt for a period of several years after the individual files the case. According to the U.S. Courts, there is a time period of eight years after a Chapter 7 bankruptcy case before the court can reduce or remove the debtor's debt through Chapter 7 again.
  
  

Bankruptcy Classes

• Filing for bankruptcy requires the filer to attend courses. The debtor must attend bankruptcy counseling, which includes advice about alternative options such as debt negotiation services. According to the Federal Trade Commission, the bankruptcy counseling service will charge a fee, although it must waive the fee if the debtor cannot afford to pay it. The debtor must also attend debtor education courses after the debtor files for bankruptcy, which requires an additional fee that the debtor also can request to waive.