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You’re facing a mountain of debt and considering bankruptcy because you think it’s your last, best option. But are you aware that there are alternatives? Before pursuing bankruptcy, remember that there’s no one-size-fits-all solution for debt. Each situation is unique, and what works for one person might not work for another. It’s a good idea to explore all your options before you make a decision. 

Key Takeaways
  • Bankruptcy can be extreme and inflexible.
  • It is a major financial decision with strict qualifications – and not everyone qualifies.
  • Unlike bankruptcy, debt resolution allows you to maintain control over your monthly payments and doesn’t put your assets at risk.

Ask Yourself – Why Am I Considering Bankruptcy in the First Place?

Bankruptcy has been around for a long time! Federal bankruptcy laws first appeared in the United States in 1800, and revisions to the law during the Great Depression turned bankruptcy into a household word. So chances are good you’ve heard of it and associate it with being broke or unable to pay your bills. 

4 Alternatives to Bankruptcy

Bankruptcy is so well known it might seem like the ultimate solution when you’re drowning in debt. Just because you’ve heard of bankruptcy doesn’t mean it’s the right choice for you. Here are alternatives to consider:

Debt Resolution Program

Also known as a debt resolution program, it involves experts negotiating with your creditors until they agree to new terms on your enrolled accounts. The new terms can significantly reduce what you owe and stop interest from growing what you owe, saving you money and allowing you to pay off your debt faster. 

Debt Consolidation Loan

A debt consolidation loan can be used to pay off multiple debts and simplify monthly payments. Instead of keeping track of payments, you focus on a single one. Ideally, a debt consolidation loan would have a lower interest rate than what you are currently paying, so you save money.

Credit Counseling

Credit counseling agencies assist people who need help managing their finances. Credit counselors use their financial expertise to help you assess your current financial status, address any issues, and help you make a plan for your financial goals. 

Debt Management Plan (DMP)

With a debt management plan, you deposit money each month with a credit counseling organization. They then use your deposits to pay your unsecured debts according to a payment schedule they’ve developed with your creditors.

What is The Best Alternative to Bankruptcy?

While all these options have their pros and cons, debt resolution stands out as a particularly attractive choice for those overwhelmed by debt. Unlike bankruptcy, debt resolution allows you to maintain control over your monthly payments and doesn’t put your assets at risk.

Bankruptcy Can Be Extreme and Inflexible

While it may be the right path for some, we don’t recommend it for people who have a steady source of income coming in. 

Bankruptcy Isn’t as Simple or Accessible as It Seems

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 no 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.

Chapter 7 Bankruptcy Cons

  • Assets liquidated
  • Expensive Legal Fees
  • Long-term credit impact
  • On public record

Chapter 13 Bankruptcy Cons

  • Court-ordered repayment plan
  • No control over payment amount
  • Long-term credit impact
  • On public record

Pros and Cons of Debt Resolution

Debt resolution can significantly reduce the total amount you owe and give you control over your monthly payments. However, the process can affect your credit score and lead to an increase in creditor calls at the beginning of the program.


  • Can significantly reduce the total amount you owe.
  • Gives you control over your monthly payments.
  • Allows you to avoid bankruptcy and its long-term impact on your credit score.
  • Fees are success-based and never charged up front. 


  • Creditors aren’t required to negotiate, and some might refuse.
  • Your credit score will drop initially but can recover as debts are resolved.
  • Creditor calls will increase initially but should stop as debts are resolved. 

Pros and Cons of Debt Consolidation Loan

A debt consolidation loan can simplify monthly payments and might lower your interest rate if you have good credit, but it may not be aggressive enough for people experiencing financial hardship.  


  • Simplifies your finances by combining multiple debts into one monthly payment.
  • Can save you money if you qualify for lower interest rates than your current debts.
  • Could improve your credit score over time if you keep up with payments.


  • Requires good credit to get favorable interest rates.
  • The consolidated monthly payment amount is usually not flexible.
  • You might end up paying more in interest over the life of the loan.
  • If the loan is secured against an asset (like your home), you could lose it if you can’t make payments.

Pros and Cons of Credit Counseling

Credit counselors can help you make smarter decisions and give you advice about your finances, but ultimately, they don’t directly reduce the amount you owe. 


  • Provides practical advice on managing finances.
  • Helps develop a budget.
  • Offers free educational workshops.
  • May negotiate lower interest rates with your creditors.


  • Doesn’t directly reduce the amount you owe.
  • Not all credit counseling organizations are reputable.
  • It can take time to see significant results.

Pros and Cons of Debt Management Plan (DMP)

A debt management plan can help consolidate your debt and lower your monthly payment, but it usually does not reduce what you owe. Also, creditors may monitor your credit report and require you to stop using credit cards that are not in the program. 


  • Organize your unsecured debts into one monthly payment.
  • Credit counselors negotiate with your creditors, possibly lowering your interest rates or waiving fees.
  • Can help you pay off your debt in a set timeframe.


  • DMPs usually do not reduce what you owe.
  • May require you to stop using credit cards that aren’t part of the DMP during the program.
  • If you miss a payment, your creditors could cancel any concessions they’ve made.

What Does Bankruptcy Do to Your Credit Health?

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 up to 10 years, making it difficult to get credit, buy a home, get life insurance, or even secure employment1. That’s why finding a bankruptcy alternative is so crucial.

Living Paycheck to Paycheck: Does Bankruptcy Make Sense?

If you’re living paycheck to paycheck, filing for bankruptcy might seem like the only way out. But remember, bankruptcy doesn’t give you control over your monthly payments and can even put your assets at risk. Plus, it doesn’t address the root issue: a lack of financial management skills. A more holistic approach would be to explore debt consolidation options and learn how to get out of debt.

What’s Next? Making a Decision about Bankruptcy

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 these alternatives.

Not sure which option is right for you? Contact Accredited Debt Relief and speak to a Consolidation Specialist who can help you make the right decision. 

The information provided in this article 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.

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