What is the Difference Between Debt Relief and Bankruptcy in Pennsylvania?

Maintaining healthy finances is difficult and requires constant work. If your finances are not where they should be, you might be considering some type of debt relief program or filing for bankruptcy.

Debt relief and bankruptcy might sound similar and are often discussed in similar situations, but they are very different. Debt relief might come from various sources, and you might not necessarily be maneuvering through legal channels like courts. Bankruptcy is a matter of federal law, and a court might help you discharge certain debts while you pay off others. There are pros and cons to either option. While debt relief helps people avoid the stigma of bankruptcy, outcomes are not guaranteed, and you might not see an improvement in your financial situation. Bankruptcy can help you discharge significant debts, but having it on your financial records might hinder future business or financial opportunities.

Schedule a case evaluation for no cost with our Philadelphia bankruptcy attorneys by calling Young, Marr, Mallis & Associates at (215) 701-6519.

Deciding Between Debt Relief and Bankruptcy in Pennsylvania

Debt relief and bankruptcy can help you escape an unhealthy financial situation plagued by debt, but they take very different approaches and have different consequences. Our West Chester bankruptcy attorneys can discuss both options and help you determine which is best for your situation.

Debt Relief

Some more common forms of debt relief include debt consolidation, debt settlement, and credit counseling. It should be noted that debt relief is not bankruptcy, and you are not always legally bound by the results of a debt relief program or service. It is wise to speak to an attorney about debt relief before entering any kind of program.

Debt consolidation involves taking out a new loan to pay down multiple debts all at once. Once those debts are taken care of, you only have to focus on paying back the one new loan instead of making multiple payments on multiple debts. This can be a helpful option for people struggling with multiple creditors.

Debt settlement is a different debt relief option where you or a representative – an attorney – negotiates with creditors so that they accept a portion of your total debt as payment in full. How big this portion of your debt is will depend on your creditors and what they are willing to accept.

Credit counseling might be provided by a credit counseling agency and is designed to provide you with the tools you need to improve your financial situation. Credit counseling does not necessarily involve any legal forms or filings. Instead, a counselor will review your credit reports, income, debts, and regular expenses to help you develop strategies and habits to help you escape debts.


Bankruptcy is often a more intimidating option for people in debt, but it can greatly help those with significant debts. Bankruptcy is governed by federal law and involves a formal legal process that our bankruptcy attorneys can assist you with.

Chapter 7 bankruptcy works by helping people liquidate various assets (e.g., homes, vehicles, properties) and using the proceeds to pay off debts. Debts that are still left unpaid can be discharged by court order. When a debt is discharged, the debtor is no longer legally liable for paying for it.

Chapter 13 works differently than Chapter 7 bankruptcy and focuses more on the reorganization of debts rather than liquidations. Instead of selling off assets, you and an attorney will develop a feasible payment plan, and, if your creditors agree, you may have certain debts discharged after adhering to the payment plan for a time, usually a few years.

Advantages and Disadvantages of Bankruptcy and Debt Relief

Debt relief programs and bankruptcy might both help you find relief from crippling debt, but there are some downsides you should know about before getting started. It is important to weigh the pros and cons of both options before deciding which path to take.


One benefit common across many debt relief options is avoiding the stigma of bankruptcy. Debt relief programs can help you manage your debts without having bankruptcy reflected on your records.

You might also gain the skills you need to make better financial decisions and avoid debt in the future. Debt relief services like credit counseling can help you learn how to manage debts on your own and come up with financial strategies to generate wealth rather than hemorrhage money.

Debt relief might also help you save money in the long run. For example, you might get a better interest rate by reconsolidating your debt using a debt consolidation loan. Also, making one payment per month instead of several might make it easier to save money.

Bankruptcy might allow you to discharge significant debts, meaning you will no longer be liable for payments. In addition, other debts might be taken care of by liquidating assets or setting up a payment plan. Depending on the path you choose, bankruptcy may be completed in a few short months.


Some downsides to debt relief programs include a significant toll on your credit score, and some debt relief strategies are not guaranteed to work. For example, you might try to negotiate a debt settlement with your creditors to alleviate some of your debts. However, if your creditors do not budge on payment, you might be out of luck. On top of that, you might still pay fees to a debt relief service provider.

Bankruptcy also causes your credit score to take a serious hit, and a massive stigma is associated with bankruptcy. After filing for bankruptcy, it will be reflected on credit reports and financial records. If you ever go to buy a home, take out a loan, or open a business in the future, creditors will see you previously filed for bankruptcy and might not want to work with you.

Additionally, if you elect to file Chapter 7 bankruptcy, you risk losing important assets to liquidation. Your home, vehicle, and other properties or assets could be sold to pay your debts.

Get in Touch with Our Bankruptcy Attorneys for Assistance

To arrange a free case evaluation with our Pennsylvania bankruptcy lawyers, call Young, Marr, Mallis & Associates at (215) 701-6519.

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