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Advantages of bankruptcy:

  • One of the most important advantages of filing for bankruptcy is that you can obtain a fresh financial start.
  • If you are eligible for Chapter 7 most of your unsecured debts may be forgiven or discharged. A secured debt is one which the creditor is entitled to collect by seizing and selling certain assets of the debtor if payments are missed, such as a home mortgage or car loan.
  • You may be able to keep (that is, exempt) many of your assets, although state laws vary widely in defining which assets you may keep.
  • Collection efforts must stop as soon as you file for bankruptcy under Chapter 7 or Chapter 13.
  • You cannot be fired from your job solely because you filed for bankruptcy.

Disadvantages of bankruptcy:

  • A bankruptcy can remain on your credit record for 7-10 years and can affect your future finances.
  • A bankruptcy may impede your chances of getting a mortgage or car loan for some time.
  • Not all debt will be discharged. Examples of debt that cannot be discharged include: child support, alimony, some student loans, divorce settlements and some income taxes. You should check with an attorney on the specific categories of debt that will be allowed for discharge.


Filing bankruptcy does not necessarily eliminate all debts, and often simply restructures existing debts - this leaves you responsible for all future payments. Filing bankruptcy also stays with you for up to 10 years and you may have difficulty getting any type of loan. Bankruptcy is public record and will be reflected on your credit report but not permanently. Speak to one of our credit counseling experts if you need assistance.


Anyone who is considering bankruptcy needs to fully understand the process and the laws surrounding bankruptcy. Questions about bankruptcy should be addressed by a licensed bankruptcy attorney.


There are alternatives to bankruptcy and you can avoid bankruptcy with outside help. It is important to get early advice about bankruptcy if you are hoping to use the bankruptcy process to save your home or your car. Successful debt management can be a valuable alternative.


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American Consumer Credit Counseling (ACCC) provides nonprofit credit counseling, debt management services, credit relief and debt relief help to consumers nationwide. Our free credit counseling services help individuals and families learn how to manage debt more effectively and how to get rid of debt more quickly. Our certified credit counselors show consumers the various ways to pay off debt, and we offer affordable debt management programs for getting rid of credit card debt by consolidating debt payments. Our debt negotiation services help with managing credit card debt and paying off debt more quickly by reducing interest rates and finance charges. And our financial education services help consumers manage money more effectively, find reputable debt consolidation companies and answer questions like "How do you consolidate debt?"

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