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Is bankruptcy a good means to manage debt?

On Behalf of | Nov 15, 2018 | Firm News | 0 comments

If you’re mired in debt and unable to see a way out, you likely will find yourself with a couple of options. Enrolling in a debt management plan or filing for bankruptcy are two solutions for debtors who can no longer pay off their financial obligations.

Many people automatically assume that the former is better than the latter when it comes to settling their debts. But is that really the case?

Why bankruptcy might be better

To understand which option is the better choice for you, let’s compare the two. First, we’ll look at the advantages and liabilities of debt management plans.


  • It’s easier to qualify for this since there is no means test.
  • You don’t have to surrender any property.
  • Your credit score won’t reflect a bankruptcy.


  • It only covers unsecured debts, e.g., medical bills and credit cards.
  • You could be making payments for as long as five years.
  • Your debts are not discharged and can still be subject to collection actions.

Let’s now examine the pros and cons of filing for bankruptcy.


  • There are different consumer bankruptcy options for you to choose, namely Chapter 7 or Chapter 13.
  • It’s usually a quicker resolution, i.e., four to six months with Chapter 7 and three to five years with Chapter 13.
  • The automatic stay of bankruptcy protects you from further collection action, including foreclosures.
  • Filing for Chapter 13 can allow you to retain your property.
  • Most of your debts will be fully discharged at the end. Child support arrearages, back taxes and most student loans are typically non-dischargeable debts.


  • Your credit score will take a mighty hit.
  • Chapter 7 bankruptcy requires passing a means test.
  • Under Chapter 7, you might have to surrender some property.
  • You will have to pay attorneys’ fees, as well as filing fees, unless you file pro se (without an attorney).

Wipe your slate clean

Most debtors realize that shedding all or a major portion of their outstanding debts is far superior to continuing to struggle to pay down what they owe. Doing so allows you to make a fresh start. Also, since completion of a credit counseling program is required to discharge your debts, you can acquire the financial know-how to avoid falling into such a trap once again.