ACCC Says Filing Bankruptcy is Not Always the Only Option

American Consumer Credit Counseling helps consumers avoid bankruptcy and pay down their debt

Boston, MA – August 12, 2021

Over nine in ten Americans carry some debt, such as a credit card balance, a car loan, or a mortgage. Debt can begin to spiral out of control before consumers even realize it and, in some cases, before they know it – they are considering bankruptcy. National nonprofit American Consumer Credit Counseling (ACCC) explains how consumers can avoid bankruptcy and pay down their debt.

Bankruptcy is a federal process in which people or organizations who cannot repay debts to their creditors can seek relief from their debts. Chapter 7 and Chapter 13 are for individual consumers and Chapter 11 is for businesses. A Chapter 7 bankruptcy deals with liquidation, which means the court will appoint a trustee to liquidate or sell some of a consumer’s belongings to pay back their creditors. Chapter 13 bankruptcy deals with reorganization. In other words, a consumer’s debt will be reorganized into one monthly payment. Payments usually last 36 to 60 months and consumers only pay back as much as they can afford. Chapter 11 is utilized for business debts. This tends to be used by large businesses to come up with a reorganization plan that helps them stay active while repaying creditors.

“Anyone who is considering bankruptcy needs to fully understand the process and the laws surrounding it,” said Allen Amadin, President and CEO of American Consumer Credit Counseling. “Filing for bankruptcy does not necessarily eliminate all debts. Bankruptcy is a public record and can stay with you for up to 10 years, potentially causing difficulty getting any type of loan for years to come.”

Despite the massive surge in unemployment due to the COVID-19 pandemic, bankruptcy filings decreased in 2020. According to the Administrative Office of the U.S. Courts, there was a total of 544,463 bankruptcy filings in the U.S. in 2020, compared to 744,940 in 2019. That’s nearly a 30 percent decrease in filings in just one year. Though there was a decrease in overall filings, Chapter 11 bankruptcies increased by just over 18 percent.

“There are alternatives to bankruptcy and can be avoided with outside help,” said Katie Ross, Executive Vice President of American Consumer Credit Counseling. “Successful debt management can be a valuable alternative to avoid bankruptcy. Managing debt is hard and seeking out a debt counselor can help you make sense of the situation and develop a plan to pay down the debt.”

In 2020, the average ACCC Debt Management Program client household was 2.2 people with an average income of $52,430.51. At the same time, the national medium income used to determine if a consumer with a two-person household qualifies for a three-year or five-year Chapter 13 Bankruptcy repayment plan was $67,063 annually. According to ACCC, 85 percent of those who were enrolled in their Debt Management Program had an income less than the national median in 2020.

While filing for bankruptcy may be helpful, it is important to recognize the potential negative impacts of doing so. One of the more significant impacts is a lowered credit score, often dipping below 600, which can appear on credit reports for up to 10 years. Filing for bankruptcy can also make it difficult to get a loan or mortgage, buy a house or car, rent an apartment, and even get a job. In many cases, bankruptcy causes insurance and interest rates to go up as well.

There are options to avoid bankruptcy which include:

  1. A Debt Management ProgramA debt management program consolidates your unsecured debt into one low affordable monthly payment that reduces your finance charges, late fees, and potential over-limit fees. In most cases you can eliminate debt in 3-5 years.
  2. Reduce your spending – Cutting out unnecessary expenses, such as a gym membership, is a great way to save some money that you can put towards paying your creditors.
  3. Increase your income – The more money you have coming in, the more money you can put towards paying off your debts. Consider asking for more hours at work, getting a second job, or selling things like valuable items such as jewelry.
  4. Debt consolidation The process consists of securing a loan to consolidate all debts into one single larger debt. This can help consumers be more financially organized, pay down their debt more quickly while benefitting from a possible reduction in interest rates.
  5. Debt settlement Debt settlement is a strategy for eliminating debt that involves working with settlement services to get creditors to settle the debt for a lower amount than what is owed. This strategy is only effective if you are in default and creditors may be more willing to settles versus facing not getting anything back.

There are pros and cons to everything, so be sure to do your research to see which options will work best for your financial situation.

About American Consumer Credit Counseling

American Consumer Credit Counseling (ACCC) is a nonprofit credit counseling 501(c)(3) organization dedicated to empowering consumers to achieve financial management through credit counseling, debt management, bankruptcy counseling, housing counseling, student loan counseling, and financial education concerning debt solutions. To help consumers reach their goal of debt relief, ACCC provides a range of free consumer personal finance resources on a variety of topics including budgeting, credit and debt management, student loan assistance, youth and money, homeownership, identity theft, senior living, and retirement. Consumers can use ACCC’s worksheets, videos, calculators, and blog articles to make the best possible decisions regarding their financial future. ACCC holds an A+ rating with the Better Business Bureau and is a member of the National Foundation for Credit Counseling® (NFCC®). For more information or to access free financial education resources, log on to or visit