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Credit Counseling vs Chapter 7 Bankruptcy for Debt Relief

credit counseling vs chapter 7 bankruptcyWhen debt becomes unmanageable, it’s time to bring in some help. There are a lot of options to consider. Financial planners, credit counseling, debt consolidation, and bankruptcy are some of those choices. Let’s compare credit counseling vs chapter 7 bankruptcy to see what might be a good fit to address your financial needs.

Comparing Credit Counseling vs Chapter 7 Bankruptcy

Credit Counseling

A credit counseling service helps identify and adopt strategies to reach your financial goals. Credit counselors assess your current financial situation. This includes a review of your income, assets, and expenses. Next, they create a plan that works for you. Entering a debt management program, declaring bankruptcy or simply fine-tuning your budget are all possible next steps.

Beyond just a plan, you gain financial literacy skills to better equipped to manage your finances.

Chapter 7 Bankruptcy

Bankruptcy is a debt solution handled in a federal court in which an insolvent debtor’s assets are liquidated and the debtor is relieved of further liability. There are two types of bankruptcy: Chapter 7 and Chapter 13.

Chapter 7 is when the court appoints a Trustee who may liquidate or sell some things that you own to pay your creditors for your consumer debt. Chapter 7 cancels most debts. However, you can choose to pay some creditors, typically to retain a car or home.

Chapter 13 reorganizes your debts into one monthly payment for 36 to 60 months. The plan cannot go longer than five years and you don’t have to repay all of your consumer debt. You pay only as much as you can afford; the minimum payment may be affected by the property you want to keep.

Additionally, a bankruptcy will stay with you for up to 10 years. Therefore, you may have difficulty getting future credit.

Credit Counseling vs Chapter 7 Bankruptcy

A comparison of credit counseling vs chapter 7 bankruptcy reveals how different they are. Credit counseling is an opportunity for anyone to review their finances. A counseling session may lead to a chapter 7 bankruptcy recommendation. Bankruptcy is a drastic, last debt relief option.

Finally, credit counseling is a great way to evaluate your finances to try and avoid bankruptcy and to learn your next steps.

If you need to speak to a credit counselor about managing your finances, call ACCC today at 800-769-3571. 

ABOUT AUTHOR / Michelle

Michelle is a regular contributor to Talking Cents. She has taken several financial courses on debt management and is ready to circulate what she has learned from them as well as lessons from her own life- family to DIY projects to student loan debt.

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