Declaring yourself bankrupt is a scary option to have to consider. If you are overwhelmed with debt and have no way to pay your bills, bankruptcy can be used to help you get a handle on your financial life.

There are two common types of bankruptcy for individuals. Chapter 7 is a liquidation bankruptcy where any assets you have will be sold to pay off part of your debt and the rest will be discharged. In most cases your car and personal belongings are protected from liquidation. If you do not have many assets and much of your debt is unsecured debt (for example, credit card debt) then you should consider Chapter 7.

Chapter 13 is a restructuring bankruptcy. Instead of selling off your belongings, your debt will be consolidated and you will be required to make a single monthly payment over several years. If you have a home, car or other property you want to keep then Chapter 13 will probably work for you.

There are some debts that cannot be discharged through bankruptcy. If you are wondering if you can file bankruptcy on student loans or back owed taxes, the answer is no. Taxes, federal student loans and back child support can never be eliminated through bankruptcy. However, you may be able to restructure your payments with Chapter 13.

Are you worried about your credit score after bankruptcy? Your credit score will be affected if you file. However, not paying your bills on time will also bring down your score. Try to keep in mind that bankruptcy is a way to start over and begin building good credit as soon as possible. Getting out of debt is the first step to building positive credit.

Bankruptcy may be scary, but it can help put you back in control of your financial life.
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