Comparing Bankruptcy to Credit Counseling

Summary: You must understand the potential results you can get with credit counseling versus Chapter 7 and Chapter 13 bankruptcy. Little can be done with credit counseling because your financial problem has become a Colorado legal problem.

Your Bills Have Become Legal Problems, Not Credit Counseling Problems

Because your financial problems have become legal problems, little can be done with credit counseling.  You must consider your legal defenses as well as bankruptcy.  This chart shows some of the differences.

Benefit	Chapter 7	Chapter 13	Credit Counseling
1. Stops foreclosure immediately	Yes	Yes	No
2. Stops foreclosure and repossession to allow you to sell at market value instead of for a lesser short sale	Yes	Yes	No
3. Avoids income tax payment for forgiveness of debt	Yes	Yes	No
4. Allows you to keep exempt property, such as $60,000 home equity, $5,000/person car equity, & 401(k)	Yes	Yes	No
5. Allows for a fresh start within about 100 days	Yes	N/A	No
6. Gives you a fresh start with a clean slate	Yes	Yes	No
7. Repayment is based on your ability to pay	N/A	Yes	No
8. Deals with both secured and unsecured debt	Yes	Yes	No
9. Surrender your home and/or car without any bills	Yes	Yes	No
10. Deals with mortgages, car loans, credit card bills, medical bills, & other similar bills	Yes	Yes	No
11. Strip-off or strip-down (reduce) liens	N/A	Yes	No
12. Allows you to go after bill collectors and lenders for violations of law, including collection law, deceptive trade practices, truth in lending, and other laws	Yes	Yes	No
13. Ensures legal protection to protect you from harassment by creditors and bill collectors	Yes	Yes	No
14. Stops lawsuits, wage garnishment, bank account levy, and allows recovery of recent garnishments	Yes	Yes	No
15. Allows you to obtain credit again afterward	Yes	Yes	Yes
16. Affects you credit score in a similar manner	Yes	Yes	No