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Bankruptcy is a serious decision that involves legal proceedings. It’s also a matter of public record that can stay on your credit for up to 10 years. Because it is so serious, it’s not the right solution for everyone struggling with debt.
Luckily, if you don’t want to file for bankruptcy there are plenty of alternatives that offer a different pathway out of debt.
Before you make a decision about bankruptcy, it’s important to fully understand what it is and what it can and can’t do for you.
Bankruptcy is a legal process designed to help financially insolvent people or businesses who can’t repay their debts. It can stop collections, discharge certain types of debt and offer a financial reset with some serious long-term consequences.
Bankruptcy is not a private or casual solution for debt. Unless sealed, your bankruptcy becomes part of the public record, meaning landlords, lenders, employers or even acquaintances could access your financial history via court records or credit reports. It also comes with court fees, carries long-term, severe credit impact and can even interfere with your job prospects or housing options.
There are a few different types of bankruptcy that can be filed in the United States, but most individual filers will choose between Chapter 7 or Chapter 13.
Chapter 7, often called “liquidation” bankruptcy, discharges most unsecured debts if you qualify through a means test — a financial review that proves you cannot afford to repay what you owe.
In some cases, you may need to sell non-essential assets, like luxury items, second homes or cars or non-retirement investments. The value goes toward your debts and the rest is discharged.
Chapter 7 is typically the quickest and most common type of bankruptcy filed by individuals, especially those with lower incomes and fewer assets.
Chapter 13, often called “reorganization” bankruptcy, is a court-approved repayment plan that allows people with regular income to repay all or part of their debts over time. It helps prevent forced asset sales and triggers an automatic stay, which halts collections, lawsuits, and wage garnishments while your repayment plan is in place.
It’s designed for people with steady income who can afford monthly payments and want to avoid foreclosures, repossessions or other forced asset sales.
*Attorney fees vary by location, complexity and individual circumstances. Be sure to request a written estimate before proceeding.
Although bankruptcy can provide relief to many, it may not be the best option for everyone experiencing financial hardship. It is highly recommended that you speak with an attorney before proceeding with a bankruptcy filing.
An attorney can help you determine how much of your debt can be eliminated by bankruptcy and what your court fees and expenses may be. Many clients find that they can save more by going with an alternative like debt consolidation.
Debt Discharge: The biggest benefit of filing for bankruptcy is the potential to have your debts discharged. You are no longer obligated to pay back your creditors when your debts are discharged.
Protection of Important Assets: Filing for bankruptcy might protect the home and main vehicle, which could make it possible to continue living in the home and commuting to work.
No More Collection Calls: Debt collectors are not allowed to continue collection activities while the bankruptcy case is pending in court.
Negative Impact on Credit: Bankruptcy filings can stay on your credit report for up to 10 years. This may cause problems if you intend to apply for credit in the future.
Not All Debts are Covered: Most student loans, alimony, child support and fines or fees owed to the government are not eligible to be discharged.
Other Consequences: Taking on new credit during bankruptcy can be difficult. With Chapter 7 bankruptcy, you may apply for credit as soon as the debt is discharged. With Chapter 13 bankruptcy, you must have prior approval from the court or the Chapter 13 trustee. Also, your payments must be current at the time of the request.
If you’re living paycheck to paycheck or struggling to afford essentials like groceries and gas, bankruptcy can feel like the obvious choice — a “get out of debt” free card. But it’s more than a financial reset; there are serious strings attached.
Before you file, here are 10 compelling reasons to consider other options first:
Bankruptcy stays on your credit report for up to 10 years, affecting your ability to qualify for credit cards, car loans, mortgages and more. Even if your debts are discharged, the long-term impact can follow you well into the next decade.
One of the biggest misconceptions is that bankruptcy gives you control. The truth is, bankruptcy is a rigid, court-controlled process. In Chapter 13, for example, you're locked into a 3–5 year repayment plan with court-set monthly payments regardless of how your income or expenses change. There's very little room to adjust once the plan is in place unless you can demonstrate a substantial change in your circumstance.
Your bankruptcy filing becomes a matter of public record, meaning landlords, lenders, employers or even acquaintances could access your financial history. If privacy matters to you, bankruptcy is far from confidential.
In Chapter 7, the court may require the sale of non-exempt assets (such as valuable electronics, second vehicles or investment accounts) to repay creditors. Even essential items may come under scrutiny if their value exceeds legal exemptions.
Bankruptcy won’t erase everything. Student loans, child support, alimony, recent taxes and some personal injury debts usually cannot be wiped out. You could still be responsible for significant balances even after completing the process.
Filing for bankruptcy involves court fees, credit counseling requirements and attorney costs, often totaling several thousand dollars. For someone already struggling with debt, these expenses can feel like salt in the wound.
Chapter 13 lasts 3–5 years and even Chapter 7 can take several months to finalize. Meanwhile, you’ll need to comply with strict court requirements, attend hearings and submit detailed financial disclosures, often with little flexibility or personal input.
While employers can’t fire you for filing bankruptcy, many conduct background checks during the hiring process, especially for positions involving financial responsibilities, sensitive information, or security clearance. In these cases, a bankruptcy filing may raise concerns about financial reliability or risk, even if it doesn’t reflect on your character or job performance.
Bankruptcy can erase debt but it doesn’t change financial behavior. Without learning budgeting, planning or emergency saving, many filers end up in the same cycle of debt again within a few years. True financial recovery requires more than legal relief.
Debt consolidation options and credit counseling can reduce your debt or monthly payments without court involvement, asset loss or long-term credit damage. These options give you more flexibility and more control over your financial future and can work faster than bankruptcy depending on the type and circumstances.
It is a major financial decision with strict qualifications - and not everyone qualifies. Depending on the type, it can force you to liquidate assets or adhere to a strict repayment plan that gives you limited control over your monthly payment amount. It also comes with legal fees and unless it is sealed, bankruptcy is a public record and can affect your reputation and creditworthiness for 7–10 years.
While all these options have their own pros and cons, debt consolidation options stand out as a particularly attractive choice for those overwhelmed by debt. Unlike bankruptcy, debt consolidation options allow you to maintain control over your monthly payments, won’t put your assets at risk and do not come with mandatory legal proceedings.
If you’re struggling with your debt, bankruptcy is simply one of many options to consider. It’s definitely not the only way out. There are proven alternatives that can help you regain control of your finances. Before filing, fully consider these alternatives:
Debt consolidation options allow you to combine multiple debts (such as credit cards, medical bills or personal loans) into a single monthly payment.
Depending on your situation and the option you choose this can lead to:
While not every solution offers all these benefits at once, working with a Consolidation Specialist gives you the ability to choose a consolidation option that fits your goals and financial reality — something bankruptcy rarely allows.
This type of consolidation involves moving your high-interest debt into a new loan or credit product, such as:
These options are designed to simplify your finances and reduce interest, especially if you have a strong credit profile.
Why people choose it: It can lower your interest rate, help you avoid missed payments and create a clear path to payoff. All without involving the court system or risking your assets.
If your debts are already behind or you’re struggling to keep up with minimum payments, a debt consolidation program may be a better fit. These programs involve working with a company that negotiates with your creditors to make your repayment more affordable and manageable.
Why people choose it: It offers meaningful payment relief, avoids bankruptcy court and may even reduce the total amount you repay. Unlike bankruptcy, you retain more control over how and when you pay.
Debt Management Plans (DMPs) are a type of debt repayment system offered by credit counseling agencies. It’s important to note that DMPs are only one of many options that credit counselors may suggest, as they are also able to break down your credit report, help you create budgets and provide loan counseling and financial education resources.
First, you can avoid bankruptcy altogether by taking on as little debt as possible and making all your debt payments on time. If you do find yourself in need of debt help, you can avoid bankruptcy by exploring alternatives like debt consolidation, debt management and other options. Speaking to a Consolidation Specialist is a great first step and can help you understand which options are right for you and your debt.
Debt consolidation options, debt management programs and credit counseling are all bankruptcy alternatives that can help you get out of debt efficiently, offer immediate financial relief and save you money over time. A Consolidation Specialist can examine your finances and recommend personalized bankruptcy alternatives based on your situation.
Filing for bankruptcy can damage your creditworthiness and may prevent you from taking on new credit or limit your housing options. Even if you do qualify for future credit, your interest rates can be less favorable because a bankruptcy makes you a high risk borrower. Bankruptcy filings can also stay on your credit report for 7–10 years, depending on the type. Make sure you consider alternative debt options before committing to bankruptcy.
Filing for bankruptcy, whether it's Chapter 7 bankruptcy or Chapter 13 bankruptcy, can have a significant impact on your credit health. It stays on your credit report for 7–10 years, making it difficult to get credit or secure a favorable rate, buy a home, rent an apartment, get life insurance or even secure employment.
Overcoming financial difficulties isn't an overnight process. It takes discipline, patience and the right plan. Before making a decision as significant as filing for bankruptcy, consider all your alternatives. If you want help sorting through your options, talking to a Consolidation Specialist on a free consultation call is a great place to start.
The information provided is not intended to constitute legal advice; instead, all information, content and materials available are for general informational purposes only. You should consult an attorney for legal advice concerning any particular legal matter.
