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Credit counseling or bankruptcy protection?

When faced with serious levels of debt, most Maryland consumers begin searching for methods of debt relief. Among the available options are credit counseling and bankruptcy protection. Both offer a path toward financial stability, but each has distinct differences. Understanding those differences can make it easier for an individual to choose the path that is best suited for their own unique needs.

Credit counseling involves meeting with a trained credit professional to structure a debt repayment program. The process is lengthy, and can take as many as five years to complete. The counselor can help negotiate better terms with one's creditors, which can lower interest rates and eliminate fees. In order to be successful in the credit counseling process, however, the consumer must have the ability and discipline to meet the agreed-upon repayment terms.

Personal bankruptcy is a legal process through which consumers can have the bulk, and sometimes all, of their unsecured debt discharged. Bankruptcy is usually completed in less than a year, and at the end of that process, the filer is released from all obligation to repay discharged debt. Bankruptcy will have a negative impact on one's credit, but credit repair can begin immediately upon completion of the bankruptcy process.

When it comes to selecting between credit counseling and bankruptcy protection, many in Maryland look at their current and projected financial circumstances. If there is sufficient income coming in to cover one's cost of living and also repay all outstanding debt, then credit counseling can be a good fit. For those who are facing serious financial strain, however, bankruptcy may offer a faster and more effective path back toward financial stability.

Source: The Huffington Post, "How Credit Counseling Helps", Terry Savage, June 16, 2015

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