If you are like many Americans, you may see bankruptcy as an absolute last-resort option. However, if you are struggling with overwhelming debt, you know that you need to do something to get your finances back on track.

You may also be noticing advertisements for debt relief companies that seem to offer a quick fix. Unfortunately, too often these agencies are for-profit businesses that are out to make money off other people’s desperation.

How do debt relief companies work?

Generally, debt relief agencies offer to consolidate what you owe into a single debt management plan. You may receive lower interest rates or other favorable terms that make it easier for you to make payments.

However, the company may also require you to pay steep monthly service fees in addition to making regular payments over a period of several years. In the end, those fees could end up costing you quite a lot, and if the agency turns out to be illegitimate, your finances and credit score may end up worse than when you started.

When might bankruptcy be a better option?

If you have a large amount of unsecured debt, like medical or credit card bills, either Chapter 7 or Chapter 13 bankruptcy may be a more reliable option. That may be especially true if you are also struggling with employment, facing foreclosure or would need to tap retirement accounts to get out of debt.

If you do have resources to help you to repay your debt in time, you may want to consider an accredited, nonprofit consumer credit counseling agency instead of a for-profit company that makes exaggerated promises. However, if your debt is truly overwhelming, bankruptcy may help you to get the fresh financial start you need.