Master Comparison: All Five Options
This table puts every major debt relief option side by side. The numbers do not lie -- but the right choice depends on your specific debt load, income, and goals.
| Factor | Ch. 7 Bankruptcy | Ch. 13 Bankruptcy | Debt Consolidation | Debt Settlement | Credit Counseling |
|---|---|---|---|---|---|
| Timeline | 3-4 months | 3-5 years | 3-5 years | 2-4 years | 3-5 years |
| Cost | $1,400-$2,900 | $3,300-$5,300+ | Loan interest (varies) | 15-25% of enrolled debt | $25-$75/month |
| Debt Eliminated | 100% of eligible debt | Remaining balance after plan | 0% -- you repay everything | 35-60% reduction typical | 0% -- you repay everything |
| Legal Protection | Automatic stay stops all collection | Automatic stay stops all collection | None | None | None |
| Stops Lawsuits | Yes, immediately | Yes, immediately | No | No | No |
| Stops Garnishment | Yes, immediately | Yes, immediately | No | No | No |
| Credit Impact | On report 10 years; rebuilding starts in months | On report 7 years; rebuilding starts after plan | Minor if payments made on time | Severe -- missed payments + settled accounts | Minor -- may note "in DMP" |
| Tax Consequences | None -- discharged debt is not taxable | None | None | Forgiven debt over $600 is taxable income (1099-C) | None |
| Success Rate | 93%+ discharge rate | 40-50% discharge rate | Depends on ability to make payments | 50-60% of accounts settled | Depends on ability to make payments |
| Eligibility | Must pass means test | Regular income required | Credit score 580+ typically needed | Anyone with unsecured debt | Anyone with unsecured debt |
Bankruptcy vs Debt Consolidation
Debt consolidation combines multiple debts into a single loan, ideally at a lower interest rate. You repay 100% of the principal. Bankruptcy eliminates the debt entirely.
| Factor | Bankruptcy (Ch. 7) | Debt Consolidation |
|---|---|---|
| You Repay | $0 of unsecured debt | 100% of principal + interest |
| Timeline | 3-4 months | 3-5 years |
| Qualification | Means test (income-based) | Credit score 580+ and income |
| Stops Collection | Yes (automatic stay) | No |
| Risk | Credit report for 10 years | If you miss payments, you are back where you started -- with a new loan |
Bottom line: Consolidation works for manageable debt with high interest rates. If your debt is overwhelming or you cannot qualify for a low-rate loan, Chapter 7 is faster and eliminates the debt entirely. Full consolidation vs bankruptcy guide.
Bankruptcy vs Debt Settlement
Debt settlement companies negotiate with creditors to accept less than you owe. You stop paying creditors and save into a dedicated account. The company negotiates once enough accumulates.
| Factor | Bankruptcy (Ch. 7) | Debt Settlement |
|---|---|---|
| Debt Reduction | 100% of eligible debt discharged | 35-60% reduction typical |
| Cost | $1,400-$2,900 | 15-25% of enrolled debt (on $50K debt = $7,500-$12,500) |
| Timeline | 3-4 months | 2-4 years |
| Lawsuits During Process | Stopped by automatic stay | Creditors can sue at any time |
| Tax Consequences | None | Forgiven debt over $600 is taxable (1099-C) |
| Guarantee of Result | 93%+ success rate | No guarantee; creditors not required to settle |
Warning: The debt settlement industry is rife with scams. The FTC banned upfront fees in 2010, but many companies skirt the rule. If a company guarantees results or charges before settling, walk away. Full settlement vs bankruptcy guide.
Bankruptcy vs Credit Counseling
Nonprofit credit counseling agencies can create a debt management plan (DMP) that reduces your interest rates and consolidates payments into one monthly amount. You repay 100% of the principal.
| Factor | Bankruptcy (Ch. 7) | Credit Counseling / DMP |
|---|---|---|
| You Repay | $0 of unsecured debt | 100% of principal at reduced interest |
| Monthly Cost | One-time $1,400-$2,900 | $25-$75/month fee + your payment |
| Duration | 3-4 months | 3-5 years |
| Interest Saved | N/A -- debt eliminated | Reduced from 20-25% to 6-9% typically |
| Creditor Participation | Mandatory (court order) | Voluntary -- creditors can refuse |
Bottom line: A DMP works best when your debt is manageable, your primary problem is high interest rates, and you have steady income to make consistent payments for 3-5 years. If your total debt exceeds your annual income, Chapter 7 is almost always the better path. Full credit counseling guide.
Bankruptcy vs Doing Nothing
Some people assume ignoring debt is a strategy. Here is what actually happens when you do nothing.
| Factor | Bankruptcy (Ch. 7) | Doing Nothing |
|---|---|---|
| Debt Outcome | Eliminated in 3-4 months | Grows with interest and fees; never goes away until statute of limitations expires |
| Collection Calls | Stop immediately (automatic stay) | Continue and intensify; may be sold to aggressive collectors |
| Lawsuits | Cannot be filed post-discharge | Creditors can sue, obtain judgments, and garnish wages |
| Wage Garnishment | Stopped and prevented | Up to 25% of disposable income |
| Credit Impact | Negative mark for 10 years, then clean | Negative marks for 7 years per account; new suits restart damage |
| Statute of Limitations | N/A -- debt eliminated | 3-10 years depending on state; ANY payment or acknowledgment restarts the clock |
Doing nothing is only viable if you are judgment-proof (no wages to garnish, no assets to seize, and no bank accounts to levy). Even then, the debt does not disappear -- creditors can renew judgments indefinitely in many states.
Find the Right Path for You
Check your bankruptcy eligibility in 30 seconds, or compare Chapter 7 vs Chapter 13 in detail.
Related Guides
- Debt Relief Comparison Chart -- quick overview
- Cost Comparison -- what each option really costs
- Chapter 7 vs 13 Master Table
- How Much Does Bankruptcy Cost?
- Debt Settlement vs Bankruptcy -- detailed guide
- Debt Consolidation vs Bankruptcy -- detailed guide