{"id":286930,"date":"2021-02-16T09:47:59","date_gmt":"2021-02-16T14:47:59","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/bankruptcy\/debt-relief\/bankruptcy-vs-credit-counseling-what-s-the-right-choice-for-yo.html"},"modified":"2024-05-24T15:21:15","modified_gmt":"2024-05-24T20:21:15","slug":"bankruptcy-vs-credit-counseling-what-s-the-right-choice-for-yo","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/bankruptcy\/debt-relief\/bankruptcy-vs-credit-counseling-what-s-the-right-choice-for-yo.html","title":{"rendered":"Credit Counseling vs. Bankruptcy: What’s the Right Choice for You?"},"content":{"rendered":"\n
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Bankruptcy vs. Credit Counseling: What's the Right Choice for You?<\/h1>\n
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\n By Amy Vandervort-Clark, J.D.<\/a> | Legally reviewed by Susan Mills Richmond, Esq.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

Entering into 2024, American households held record consumer debt. This debt includes auto loans, personal loans, mortgages, and student loans. But the most significant increase was in credit card debt<\/a>.<\/p>\r\n

You may have success negotiating with your creditors and lenders. You may find a lower interest rate in refinancing your mortgage or shopping around for special deals on credit transfers to lower your monthly payments. But if you can’t manage by yourself, you are not alone. Credit counseling might be valuable.<\/p>\r\n

Bankruptcy or Credit Counseling?<\/h2>\r\n

A credit counseling agency may be the right choice if you have a steady income and can repay your debt with some assistance. But if your debt is overwhelming and you have difficulty paying or have fallen behind, you may consider Chapter 7 or Chapter 13 bankruptcy.<\/p>\r\n

Bankruptcy<\/a> has two primary forms: liquidation with Chapter 7 bankruptcy and repayment with Chapter 13. Chapter 7<\/a>, if you qualify, will discharge or dismiss certain obligations. This includes unsecured debts, personal loans, medical debt, and credit cards. All non-exempt property<\/a> is to be sold to pay your debts. The remainder is eligible for discharge.<\/p>\r\n

Chapter 13<\/a> works with your creditors to devise a repayment plan<\/a> over three to five years. You will make one monthly payment. If you complete your payment plan, your remaining debt is eligible for discharge.<\/p>\r\n

Credit counseling requires you to repay all debts over time\u2014it’s more of an educational push in the right direction. It’s an important step. You must complete credit counseling before filing for bankruptcy.<\/p>\r\n

What Is Credit Counseling?<\/h2>\r\n

Credit counseling is an excellent way for those in debt to solve bigger-picture financial questions while managing day-to-day cash flow challenges.<\/p>\r\n

You’ll receive education from a certified credit counselor during your credit counseling sessions. You will learn about:<\/p>\r\n