If you find yourself way over your head in debt and unable to pay your bills, you may be thinking about filing bankruptcy. This is a great solution for many people and can give you that financial do-over you so desperately need. However, before you march into a bankruptcy attorney's office and start filing the paperwork, there is another option to consider: debt settlement.

Debt settlement entails working with a settlement company to pay off your debt in a structured, more approachable manner. Basically, the settlement company will call all of your creditors, negotiate with them, and then pay off your debts. You will then pay back the debt settlement company over the next two, five, or ten years. The idea is that, overall, you will pay less this way — and you will only have to pay one bill.

So what are the pros and cons of opting for debt settlement instead of bankruptcy?

Pro: Your credit won't be so badly affected.

A bankruptcy will stay on your credit report for either seven or 10 years from the date you file, depending on which type of bankruptcy you file for. With this black mark on your record, it can be really hard to get a mortgage or even a car loan, and if you do get such loans, they will be at a higher rate. Working with a debt settlement company will prevent this bankruptcy mark from appearing on your credit,  so you will have an easier time securing a loan in the future. In fact, one goal of debt settlement is to improve your score — which it will as long as you make your payments on time.

Con: You may still not be able to afford it.

Before you agree to go through with debt settlement, make sure you ask the debt settlement company what your monthly payment will be. If you cannot afford even that monthly payment, then declaring bankruptcy might be a better option. It all depends on how much debt you have compared to your income.

Pro: Creditors will stop calling you.

You're probably tired of picking up your phone only for it to be another debt collector on the line, asking for money you don't have. When you work with a debt settlement company, they will pay off your creditors, so these calls will stop. This also happens when you declare bankruptcy, but it is because the government requires the lenders to stop calling. In the case of debt settlement, they stop calling because they got paid — which you should feel good about.

Con: Some creditors may not negotiate.

While many creditors are willing to negotiate when the debt settlement company calls them, not all are willing to do so. Especially if some of your money is owed to small, local businesses, they may not be able to afford to settle for less than they owe. If too many of your creditors refuse to negotiate, then you may end up paying as much for debt settlement as you would have paid to just pay off your debts yourself — which basically defeats the point. With bankruptcy, these creditors won't have a choice; they will be told how much they get, if anything.

Pro: You'll feel more responsible.

Even though declaring bankruptcy is sometimes the only option, you may feel guilty for taking this route and walking away from your debts. With debt settlement, you can feel a lot more responsible in the way you're handling things. You're not leaving your creditors unpaid. You're simply paying them less than you initially owed, and only upon their agreement.