Bankruptcy attorney sitting with two clients

What Is the Difference Between Credit Counseling and Bankruptcy?

You’ve likely heard of bankruptcy before, but you may not have heard of credit counseling. When you’re overwhelmed by debt, it’s important to understand how these two things differ so as to figure out which is best for your particular situation. Here are the differences and how you can crawl out from under a large amount of debt and start fresh again.

Credit Counseling 

Sometimes the most difficult part of paying off your debt is understanding how it’s possible. That’s where credit counseling comes into play. Credit counseling, which is offered by both non-profit and for-profit organizations alike, helps to advise people as to how they can pay down their debt and better manage their money moving forward. These agencies generally offer money management advice as well as budgeting, while some also offer counseling on student loans or housing counseling to those with student loan debt or a mortgage respectively.  


Bankruptcy, which is more well-known, helps people legally get rid of debt, whether it’s discharging it in its entirety (Chapter 7) or by repaying it over a determined period of time (Chapter 13). Chapter 7 bankruptcy requires proof that the individual can’t repay their debt, which discharges unsecured debts. However, secured debts, such as house and car loans, must still be repaid. Chapter 13 bankruptcy is often utilized when the individual in debt earns too much to qualify for Chapter 7. Under Chapter 13 bankruptcy debts are consolidated and some portion or all of the debt will be repaid over a period of three to five years.

Deciding What’s Best for You

To put it simply, credit counseling can be a great option for when you are having a hard time responsibly managing your money or when you need help adjusting your spending in order to meet a set goal. Alternately, filing for bankruptcy will place an automatic stay on your debt collection, which prohibits your creditors from harassing you or even just contacting you while you undergo the bankruptcy process. Bankruptcy will ultimately help you to either get rid of all of your unsecured debt or to allow you adequate time (3-5 years) over which to pay your creditors back. 

Toronjo & Prosser Law Helps Those Who Are Dealing with Bankruptcy

It’s undoubtedly stressful to realize that you don’t have enough money, and even more stressful when you realize that filing for bankruptcy may be your best option. That’s why it’s important to consult with a knowledgeable and experienced Dallas bankruptcy attorney. At Toronjo & Prosser, our qualified Texas Bankruptcy Attorneys can help you to navigate the process. To learn more or to schedule a free consultation contact us online or call us today!