Definition

• Bankruptcy is a legal process in which your debts are either restructured or erased completely. Non-payment is disavowing your obligation to a debt by not repaying it.
  
  

Impact to Credit

• Bankruptcy can remain on your credit report for up to 10 years and result in your being denied credit or having to pay higher interest rates for loans. Negative information related to non-payment can remain for up to seven years.
  
  

Legal Consequences

• Bankruptcy provides legal protection against collection efforts. Non-payment leaves you vulnerable to collection action, including lawsuits from your creditors.
  
  

Cost

• It typically costs anywhere from several hundred to several thousand dollars to file for bankruptcy. The cost of non-payment is primarily felt in the damage to your credit.
  
  

Benefits

• Bankruptcy allows you to wipe the slate clean and have a fresh start. Non-payment has no real benefit and will often lead only to further negative consequences.