Credit counseling, debt settlement, or debt relief programs better for my credit than Chapter 7 bankruptcy?

Most likely not, for 99% of people. First and foremost, a Chapter 7 bankruptcy is usually over within about 90 days. Debt settlement can take years, and your credit usually does not improve much during that time. Very soon after a Chapter 7 bankruptcy, your credit rating (credit score) will improve “organically.”

This means it will improve on its own, according to the credit reporting agency rules. Of course, if you make bad credit decisions after your Chapter 7, your score will not improve. With Chapter 7, you take the initial “hit” to your credit, and then your credit starts improving, so long as you make good credit decisions.

Credit counseling or debt relief program advertise that their services take as long as 24-48 months. That’s two to four years! Compared to the 3 months that a Chapter 7 bankruptcy will take, that is a long time indeed. During your time in one of those programs, your credit will be improving slowly and incrementally, if at all.

Further, a Chapter 7 bankruptcy attorney will charge an upfront fee that is similar to or lower than the fee for debt settlement or credit counseling programs. As you can see, filing a Chapter 7 bankruptcy is often a much better choice for debt relief, because it is faster at improving your credit. Also, the upfront attorney fees are going to be similar to the fees for debt and credit relief programs.