What is Bankruptcy?

A consumer bankruptcy is a legal process that an individual may go through to seek protection from creditors.  The two most common types of bankruptcy for individuals are Chapter 7 and Chapter 13 bankruptcies.  In a Chapter 13 bankruptcy the participant typically keeps his property and with approval from a judge establishes a repayment plan to relieve all of his creditors.  In a Chapter 7 bankruptcy the participant forfeits all of his non-exempt assets to pay whatever portion of the debts possible, and the remainder is typically discharged.

Pros of Bankruptcy

• Bankruptcy is typically the final resort when you are unable to pay your debts.

Cons of Bankruptcy

• Your credit history will be damaged.  Most mortgage companies will not allow you to refinance for at least seven years after participating in Bankruptcy.
• Bankruptcies are public knowledge, so the details of your bankruptcy will be available for anyone who cares to look.

Cost of Bankruptcy

• A typical bankruptcy costs at least $1,000 and can cost much more depending on the state and the complexities involved.

Who Should Participate in Bankruptcy?

• You may be a good candidate for Bankruptcy if you cannot afford your credit card payments and you have no other options.  Bankruptcy is typically a last resort before filing for bankruptcy protection.  In addition, you must prove to the court that you are unable to pay for your debts.