Frequently Asked Questions
Is debt relief better than bankruptcy?
It depends on your situation. For most people with significant unsecured debt, Chapter 7 bankruptcy is faster, cheaper, and more effective than any non-bankruptcy option. Debt relief options like consolidation and DMPs work best for smaller, manageable debts.
Will bankruptcy ruin my credit forever?
No. The impact fades rapidly. Most people who file Chapter 7 rebuild to 700+ within 2-3 years. Meanwhile, debt settlement damages your credit through years of missed payments and settled accounts.
How much does each option cost?
Consolidation: loan interest over 3-5 years. Settlement: 15-25% of enrolled debt plus taxes on forgiven amounts. DMPs: $25-75/month for 3-5 years. Chapter 7: $1,500-2,500 total. See our cost comparison for detailed math.
Can I negotiate with creditors myself?
Yes. You can call creditors directly and negotiate reduced payoffs, eliminating the 15-25% settlement company fee. But you still face tax consequences on forgiven amounts over $600.
What debts can bankruptcy eliminate that settlement cannot?
Bankruptcy discharges medical bills, personal loans, payday loans, old utility bills, and most unsecured debts -- not just credit cards. It also provides the automatic stay, stopping lawsuits and garnishments immediately.
Do I need a lawyer for bankruptcy?
Technically no, but errors can result in property loss, denied discharge, or dismissal. Attorney fees ($1,500-2,500 for Chapter 7) are usually far less than the cost of mistakes. Many offer free consultations and payment plans.