Is Debt Relief a Better Alternative Than Bankruptcy?

Apr 8, 2021 | Debt Relief

If you are immersed in debt that you are unable to repay, it’s time to take a look at measures that can help get your financial life back on track again. In many such situations, it is common for people to find relief either through debt relief or bankruptcy. If you are wondering which of the two might work better for you, know that both come with their share of pros and cons.

What is Debt Relief?

Debt relief refers to a process of restructuring your unsecured debt, at the end of which you make a lump sum payment that is lower than the amount you actually owe. It involves taking your existing financial situation in your account and then negotiating with your lender. While you may carry out the process on your own, getting a professional to negotiate on your behalf might lead to a better deal.

What is Bankruptcy?

The U.S. constitution gives you the ability to seek relief from all or part of your debt in case you cannot repay it by filing for bankruptcy. The two main types of personal bankruptcies that apply to individuals include Chapter 7 and Chapter 13. Chapter 7 helps absolve you from all debt through a liquidation process, and Chapter 13 involves restructuring of your debt. Under Chapter 7, your non-exempt liquid assets are used to repay your creditors.

What Are the Pros and Cons of Debt Relief?

The benefits of opting for debt relief include:

  • Lowering the amount you need to repay
  • Ceasing of collection activity
  • Not having to file for bankruptcy

Drawbacks of going the debt relief way might include:

  • Having to negotiate with unwilling creditors
  • Late fees and interest adding to your existing debt
  • Having to pay debt relief fees even if you do not settle your entire debt
  • A negative effect on your creditworthiness
  • Tax implications

What Are the Pros and Cons of Bankruptcy?

Bankruptcy might seem like a quick and easy way to get rid of all your debt at the same time. However, you need to understand that people usually turn to bankruptcy as a last resort. This is because of the long-term effect that comes with the process. If you file for bankruptcy, its mention will remain in your credit reports for 7 to 10 years. This, in turn, makes getting any kind of credit during this period highly challenging.

Is Debt Relief Better Than Bankruptcy?

Going the bankruptcy way requires a court filing, whereas debt relief does not. In addition, the effect that bankruptcy has on your creditworthiness is significantly more damaging than that of debt relief. Lenders are often willing to settle for less than what is owed because they know they’ll lose way more if borrowers file for bankruptcy. However, if you feel you are unable to make a reduced lump sum payment, you might benefit by looking at what bankruptcy has to offer.

Do You Qualify for Bankruptcy?

Qualifying for Chapter 7 bankruptcy requires that you pass a means test. This is to ensure that your income is lesser than your state’s median income based on your family size. Next, you have to receive counseling through a government-approved credit counseling agency. People who do not pass the means test have the option of filing for Chapter 13.


Going through financial hardship can be challenging, all the more so when you have to deal with surmounting debt. If you are having trouble in keeping up with your repayments, consider taking action before you start falling behind. In several cases, debt relief offers just the relief that is needed, giving people the ability to restart their financial lives relatively easily. In some instances, filing for bankruptcy might be the way forward.

To find out which of the two might be better for you and to make a well-informed decision, consider getting advice from a trained professional.



    • A Fresh Start: On August 2, 2023, our firm, Morning Law Group, was approved by the United States Bankruptcy Court in the Central District of California to acquire certain of the assets of a law firm formerly known as Litigation Practice Group (“LPG”).
    • New Ownership, New Beginnings: Morning Law Group’s overriding commitment is to provide exceptional service, emphasizing transparency, integrity and client satisfaction. Our operations are completely different from LPG with a laser focus on client service excellence.
    • Past Reviews Do Not IN ANY WAY Reflect Current Practices: We acknowledge the presence of negative reviews stemming from the LPG era. These reviews reflect LPG’s past practices and do not represent Morning Law Group’s standards, ethics, or operations.
    • Commitment to Compliance and Excellence: Morning Law Group operates with the utmost adherence to regulatory compliance and industry best practices. Our team is dedicated to upholding the highest standards in every aspect of our work. To this end, we work closely with a highly-respected legal ethics monitor appointed by the US Bankruptcy Court to ensure we comply with the applicable rules.
    • Enhanced Customer Support and Communication: We have completely different and enhanced customer service protocols to ensure timely, and effective communication by people who are willing to listen. Our clients' satisfaction and trust are paramount.
    • Transparent Operations: Transparency is at the heart of our operations. We encourage clients and potential clients to reach out with any concerns or questions about our services or practices. Our goal is to keep clients fully informed of the status of their matters through regular updates by email and phone. We offer extended office hours to better service our clients (6am – 6pm Pacific Time) and we have a dedicated client services email to facilitate communication.  
    • Continuous Improvement and Feedback: We are committed to continuous improvement and openly welcome feedback. Our goal is to learn, grow and adapt to serve our clients better.
    • Building a Positive Community: Our focus is on building long-term relationships with our clients and the community. We believe in making a positive impact through our work and practices in helping individuals who are fighting debt.
    • A Strong Foundation for the Future: With a solid foundation of ethical practices, skilled professionals, and a client-centered approach, Morning Law Group is poised for a future of success and positive client experiences.