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Comparing Bankruptcy to Credit Counseling

General Rule. 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 legal problem.

Because your financial problems have become legal problems, little can be done with credit counseling. 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 insted 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


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