This is not a black and white issue. If you're struggling with debt, you should first call a credit counseling agency and see if you can realistically afford to pay back your debt under a Debt Management Program (DMP).
Check out nfcc.org for a non-profit credit counselor in your area.
Debt consolidation is, by far, generally, a better option than bankruptcy.
Debt consolidation, short of just paying your debt back yourself, will have the least impact on your credit scores.
It's also the less stressful option, since you make one monthly payment to the agency and they pay each of your creditors.
But, if you are contemplating bankruptcy, then your debt may be so high in comparison to your income that you cannot afford the payment under a DMP.
If that's the case, your next move is to meet with a bankruptcy attorney to find out whether that's a good option for you.
If it's not, or if you really want to try to pay back as much as you can afford, only then should you consider debt negotiation or debt settlement.
