Bankruptcy is giving up.... it is relatively final...
There are some advantages to bankruptcy... but a lot of disadvantages.
If you declare bankruptcy, then you have to pay the bankruptcy trustee.... so, if you're completely illiquid, that's not really an option.
Bankruptcy will erase most of your debts, and possibly not all of your debts.
You will have the stigma of being bankrupt for the rest of your life..
The nice thing is: for the debts that are 'erased', the creditors will stop calling.
The bad thing is: The debts are still 'live' according to the credit bureau. The creditors just can't collect them. I've witnessed this firsthand.
DEBT SETTLEMENT:
Debt settlement is a good alternative for those who are still making money and can afford to pay something. You don't get the bankruptcy stigma, and you are able to pay back some of the debt that you owe..
After all is said and done, most people are good people.. they want to do the right thing. Paying your debts as agreed is the best thing possible.... paying off part of your debts is the next best thing, and finally paying NO debt because you're bankrupt is the worst thing... this means that you will feel the worst for not paying your debts as agreed.