Grant Surridge

Mon, Jun 16, 2025, 9:17 AM5 min read

Picture it. You are 51 years old, newly divorced and staring down $180,000 in debt. Many Americans face a situation just like this.

Recent data from the Federal Reserve shows that the average U.S. household debt is more than $100,000. This includes mortgages, auto loans, student debt, credit cards and other forms of personal debt.

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But, what should you do if you find yourself with substantially more debt than average? Should you declare bankruptcy, or is there another viable option? The answer isn’t simple, but weighing the pros and cons can help determine the best course of action.

Remember, the type of debt and the repayment terms will be important in charting a path back to solvency.

Filing for Chapter 13 bankruptcy offers those with a regular income a way to repay their debt as part of a structured plan. This typically occurs over three to five years, and allows people to catch up on overdue payments and, unlike Chapter 7 bankruptcy, retain important assets like their home.

Often, as soon as you file for bankruptcy you are granted an automatic stay. This halts foreclosures, wage garnishments, repossessions and other collection activity from most creditors. This can be crucial for saving your assets and helping you negotiate a manageable repayment schedule.

A Chapter 13 bankruptcy repayment plan usually requires secured debt (for example, mortgages and auto loans) to be repaid eventually. However, unsecured debt (like credit cards) is often at least partially forgiven. This means you usually only pay back a portion of the outstanding debt. This is why the type of debt you have is important when considering whether to declare bankruptcy.

There are big drawbacks to bankruptcy. According to Capital One, a bankruptcy can remain on your credit report for up to 10 years, dramatically lowering your credit score and restricting future credit opportunities.

Obtaining loans in the future might be harder. A poor credit score could even affect your job prospects or ability to rent an apartment.

In light of all these complex factors, consulting with a trusted financial advisor before making any decisions is strongly recommended.