Function

• Bankruptcy is a legal proceeding involving a judge, a courtroom and probably an attorney. Credit counseling requires none of these.
  
  

Features

• Certain types of bankruptcy can get rid of your debts. Those filing for bankruptcy protection are required to get credit counseling before they file and go through a debtor education course. Credit counseling is also a repayment plan, but the terms are negotiated by professional counselors for you.
  
  

Considerations

• In a bankruptcy proceeding, some things you own may be taken and sold by the court to pay your debts and it attaches to your credit report and your credit score and stays there for 10 years, making it hard to get any sort of loan. In credit counseling, you aren't required to forfeit property and your credit report probably won't be affected, although that depends on who you owe money to and what your creditors do with the information.
  
  

Effects

• Bankruptcy allows a person to prevent a foreclosure, repossession, wage garnishment, utility shutoffs, calls to pay the money you owe, and other threats from creditors. Credit counseling usually doesn't have this power, but that depends on who you owe money.
  
  

Warning

• Bankruptcy is rarely corrupt, because everything is handled in a public arena by lawyers and judges. Credit counseling, however, can be mishandled by dishonest operators who collect up-front fees and then disappear without doing anything.