When you have considered all the options and you feel that you need to go ahead with a bankruptcy you will need to determine what type of bankruptcy is best for your particular situation. There are several different types of bankruptcies, but for personal bankruptcies there are two main ways to file under the United States Bankruptcy Code. These include a Chapter 7 or a Chapter 13 bankruptcy.

A Chapter 7 bankruptcy is filed when you have very little personal property other than your basic necessities such as clothing and furniture. To file a Chapter 7 bankruptcy you need to show that you have very little or no income left after paying your basic expenses each month or that you are having difficulty even meeting basic expenses. In a Chapter 7 most unsecured debts will be completely eliminated. The process for a Chapter 7 moves much faster than a Chapter 13, and you may even have your discharge within a few months. During the Chapter 7 process creditors are not allowed to contact you once the case has been filed or after your debt with them has been discharged.

A Chapter 13 bankruptcy may be filed for individuals who have a significant amount of debt but have a regular income and may have assets that they would like to keep such as a home or other property. These individuals will have a job with a regular income although they are unable to keep up with the payment plans as they are. In a Chapter 13 you are able to keep most of your property while spreading out payments and putting together payment plans to pay back past due amounts. According to a payment plan laid out by the bankruptcy court and/or the trustee on the account you will have approximately three to five years to pay back the debts and delinquent amounts included in the bankruptcy. During this time period you will make one payment to the trustee or distributor and will have no direct contact with the creditors.

In this recession that we have been in over the past several years more and more people are turning to bankruptcy as an option to get out from under a mountain of debt. Although it may “fix” the problem for the moment, there are dangers from filing a bankruptcy.

Consider the long-lasting effect of bankruptcy before making the decision to go forward with it. When you are faced with overwhelming debt, reduced income, bad financial choices, and persistent debt collectors, bankruptcy may feel like the only option left to you. Although bankruptcy can sometimes seem like the easy way out or even may seem like it is the fastest way to relieve the debt you are facing or even the only option you have left, is it really?

Bankruptcy can leave you with a sense of failure. Many people who have gone through a bankruptcy may be left in a depression for having to go through with it. Your credit scores will be affected negatively for up to 10 years. In fact, you may have difficulty obtaining loans for vehicle, personal loans, buying a house, or even renting an apartment due to the bankruptcy on your credit. You may even find that you will have difficulty obtaining jobs that require a clean credit check.

In future attempts to get the finances you need for such things as a car or a home you may eventually find a lender who will loan money to someone who has a previous bankruptcy but they will most likely charge much higher fees than a traditional lender would charge.

Besides the financial difficulties caused by a bankruptcy there are also emotional and relationship hardships that many people face. Filing a bankruptcy can cause additional stress on relationships and can lead to separations or divorce due to this.

Bankruptcy is not the fresh start many people think it will be. There is a lot of stress, expense, and many long-lasting effects from filing a bankruptcy. Before taking this step you need to be absolutely sure you have exhausted every other avenue.