Bankruptcy vs. Debt Consolidation, Debt Settlement and Credit Counseling (Part 1)

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There is a common misconception when it comes to bankruptcy.  Over the years, the term has become synonymous with failure and financial ruin. This myth is simply not true.  Ironically, we have found that when you are in financial distress, the damage you fear to your credit from bankruptcy has already been done as a result of your late and missed payments.  Bankruptcy can provide you with a new financial beginning.

Bankruptcy Is The Better Option It’s amazing that a whole industry has been created by banks and credit card companies to take advantage of this overstated fear of bankruptcy. Debt consolidation, debt settlement and credit counseling are all essentially the same thing—a last ditch collection effort for people who should be considering bankruptcy.

Since there are so many reasons why bankruptcy is always the better option, we will discuss the key reasons in a two-part blog series.

Part 1

We are Attorneys, Not Customer Service Representatives

The Debt Doctors at QuatriniRafferty are attorneys.  We are required to adhere to a strict professional code of ethics. In addition, we must complete annual, continuing legal education. We also have the fiduciary responsibility to act solely in the best interest of our clients.

At the Debt Doctors we take our job very seriously.  It is our professional responsibility to give you valuable advice. Our ultimate goal is to leave you in a better financial place than where we found you.

These standards do not exist with debt consolidation, debt settlement and credit counseling services. In most cases, their objective is to make money off of your debt and sell you a service that fails more often than it succeeds.

Bankruptcy is a Legal Remedy Provided to You Under Federal Law

Bankruptcy protects you from your creditors. As soon as you file for bankruptcy, a federal bankruptcy court issues an order called an automatic stay. This automatic stay prohibits debt collectors from calling you, suing you, taking your property and/or collecting debt by any other means.

Once you complete the bankruptcy process, you receive another court order called a discharge. The discharge order gives you permanent protection against collection of any and all debts which you incurred prior to filing the petition for bankruptcy.

Bankruptcy protection also offers you other powerful tools.  These tools include:

  1. Stopping foreclosure actions
  2. Creation of a plan to catch up on a delinquent mortgage
  3. Court ordered mortgage modifications
  4. Potential to restructure auto loans
  5. Power to avoid judgment liens
  6. Ability to restructure or eliminate certain tax debts
  7. Ability to force an income based repayment plan on your student loans

The power of the federal bankruptcy court will give you certainty. If you are honest and deal in good faith you will know a definitive timeline of when you will be out of debt, assurance of a resolution to your debts and a favorable court setting to fight your creditors if they violate a court discharge order.

Debt consolidation, debt settlement and credit counseling do not offer you any of these protection tools. In fact, while you are in one of their plans, the creditors can still report negatively to credit reporting agencies, send you collection letters, and file a legal collection action against you that can result in the loss of property.

As you can see, bankruptcy is a powerful financial strategy that has many tools and protections. We will continue to provide the analysis of bankruptcy vs. debt consolidation, debt settlement and credit counseling in Part 2 of this blog series.

To get immediate advice during a free consultation contact the Debt Doctors now. Call 412 395 6001 or email us at

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