What Is the Difference Between Bankruptcy and Credit Counseling?

Posted on : September 3, 2019

Faced with a mountain of debt? You’ve likely heard of terms like “bankruptcy,” and “credit counseling,” but what are they? How are bankruptcy and credit counseling different, and how can tell which is the best fit for you? Here’s what you should know about getting out of debt and who can help.

What Is Credit Counseling?

Credit counseling is a service offered by both nonprofit and for-profit organizations designed to help consumers overcome debt and raise their credit score. Credit counselors help consumers develop a budget, learn how to manage their money, and how to pay down their debt. Some credit counseling services offer student loan and housing counseling for consumers who owe student loan or mortgage debt.

What Is Bankruptcy?

Bankruptcy is a legal filing that helps consumers get rid of debt by either discharging it or repaying it back. In a Chapter 7 bankruptcy, credit card and other unsecured debt can be discharged, or essentially erased, if the consumer can prove that they cannot pay back the debt now or in the foreseeable future. In a Chapter 13 bankruptcy, consumers are given between three and five years to pay back their debts in one monthly payment. Anything left over after the repayment plan is usually discharged.

How to Choose Between Credit Counseling and Bankruptcy When You’re in Debt

Credit counseling is an excellent option for individuals who may be struggling a bit with their finances. If they need help fine tuning their budget to pursue a financial goal or pay down a debt, a credit counselor can help. However, it’s important to remember that a credit counselor cannot address debt and reduce or eliminate it in the way that a bankruptcy can. Credit counseling can only give you information about how to better manage your finances — it cannot take away your debt or improve your credit score on its own. Bankruptcy, on the other hand, can help you clear your debt and start over fresh.

Should You Call a Florida Bankruptcy Lawyer?

If you’re overwhelmed by bills and are struggling to make your payments, don’t wait to reach out to a Florida bankruptcy attorney. The situation can’t get better without you taking some kind of action, but what you do next can have a significant impact on your financial health. Make sure you have the legal guidance you need when you need it: contact Caplan Bankruptcy today for a consultation at (407) 512-9569.