While there are many different types of bankruptcy, the most common type is Chapter 7 Bankruptcy, which is the kind of that most people think of when they consider filing bankruptcy. Each type or chapter has its own unique set of rules, regulations, requirements, as well as restrictions.

If your personal debt is just too overwhelming to get out from under, or your current set of circumstances would prevent you from this overload of debt in a reasonable amount of time, this may be an option for you to consider.

You need to be aware, however, this is not going to be a cake walk. Although filing bankruptcy in past years was quite simple, it now requires a massive amount of forms to be completed and takes months to go from start to finish. It is not something that can happen overnight, so it will take significant planning on your part.

If you miss a step in the mountain of forms being filled out, this will typically put you all the way back to square one to start the process over from the beginning, so it is important that you understand bankruptcy law before you start. The court will look at your financial records in great detail, and then make a ruling. In other words, just because you want to file bankruptcy, the court may not allow it, it needs to be approved.

You need to have a good understanding of where all your debts come from. There are some types of debts, such as an IRS lien or student loans that cannot be discharged by filing bankruptcy. If a large percentage of your overall debt is the type of debts that bankruptcy will not discharge, you have little to gain by filing.

Another factor to consider is that a bankruptcy is going to stick out like a sore thumb on your credit reports for the next 7 to 10 years. This can affect your ability to be considered for a new job and open new credit accounts. While you will still be able to get credit, you will need to prove yourself all over again, since you are now considered high risk and the interest rates you will be assessed will be much higher than normal.

Are you really prepared to liquidate or sell off most of your assets? That is a requirement of Chapter 7 bankruptcy and there is no way around that. One option is to consider a different chapter, but then with the other chapter of bankruptcy that is typically used for consumers, your debt is not wiped out, but rather merely reorganized at lower interest rates and lower monthly payments. While this may give you the financial breathing room you need, your debt remains, although your assets are not sold off.

Filing Chapter 7 bankruptcy is not an easy task, and especially with the new laws, it is highly recommended that you use a reputable bankruptcy lawyer to handle the paperwork for you, as well as making intelligent suggestions and even looking at alternatives. The money you spend for the attorney will likely more than pay for itself in terms of the time you invest as well as the assets you are able to retain after all is said and done.

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