The two most famous legal debt reduction options are debt settlement and bankruptcy. Both these options are considered as legal debt reduction options and both carry advantages and disadvantage. The decision of whether you want to go for liability settlement or insolvency depends on your current financial situation and the benefits you want to gain by using a certain option to gain relief.Liability negotiation is a liability reduction process in which ay debtor who owes more than $10,000 to his creditor can negotiate with his creditor and can gain a huge discount on this amount and pay the remaining amount and gain complete relief. The benefit of using this option include: fast and complete relief by paying a small amount; minimum future threat, satisfaction of the creditors and government support.This option does not only benefit the user of this option, the creditors and the economy is even gaining benefits from using this option. The creditors do no make any losses by allowing debtors to go for this option because the amount of money they discount is given to them by the government. Due to this reason the creditors are not even showing hesitation in providing loans to borrowers. This has encouraged investment in the economy of American and the economic growth rate of American is slowly getting better. The government is providing full support to this method in order to encourage people to consider this option rather than insolvency.Insolvency is a legal law suit that a debtor files claiming that he has lost all his money and has nothing to pay off his debtors. If the law suit succeeds the debtor gains complete relief from the entire liability amount without paying back a penny. If the debtor owns some valuable property and assets; those assets are freeze by the law and then sold to compensate the creditors. If he does not own any asset; the creditors end up losing the entire lent amount.Those who file insolvency face long term issues. Their credit rating is very badly affected and they face difficulties in acquiring loans in future. They even face difficulties in acquiring jobs. The creditors and employers hesitate in providing jobs and loans to them in future. Any body can face an emergency issue in their life and they do not have enough money to handle the situation. They require creditor’s help and those who have filed for insolvency face major issue during such a situation.