Residents of Tennessee might consider bankruptcy to be a last resort solution to debt. However, in some cases, bankruptcy could actually be a smart choice. The stigma associated with bankruptcy often causes people to avoid it by taking other steps to pay off debts. But some of those, experts say, could be more harmful than bankruptcy, like using retirement savings to pay bills.

With overall American household debt topping $13 trillion at the end of 2017, estimates are that 733,000 individuals and businesses will declare bankruptcy this year. Many people will go to great lengths to avoid bankruptcy, basically robbing Peter to pay Paul, and s sometimes ‘Peter” is their own plan for retirement.

Experts say that paying bills with retirement savings is a bad idea. For one thing, a younger person could be hit with early withdrawal penalties on their retirement account. In addition, retirement savings can be maintained even if one declares bankruptcy because the law does not allow most retirement accounts to be tapped to pay creditors.

The biggest negative to filing for bankruptcy is the impact it has on a person’s credit score. It’s a huge hit, and it will stay on the report for up to 10 years. However, one big benefit of bankruptcy is that it legally puts a stop to all collection efforts. One lawyer says that sometimes a major collection effort, like a lawsuit filed by a creditor, is the thing that finally makes someone decide to choose bankruptcy. Bankruptcy can’t necessarily stop a creditor’s lawsuit that’s already been filed, but it can stop future ones from being filed.

For individuals, there are generally two types of bankruptcy. Filing for Chapter 7 liquidates assets to pay creditors and discharges remaining debt. Chapter 13 is available to people who do not qualify for Chapter 7 based on a means test. Chapter 13 involves paying off some debt through an affordable payment plan, after which remaining debt is discharged. Businesses usually have the option of Chapter 11, which is similar to Chapter 13. In some cases, individuals who don’t qualify for Chapter 7 or Chapter 13 may be able to qualify for Chapter 11.