Debt Basics

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In most all cases, financial problems begin with access to more credit than can be handled, coupled with high interest rates. If you find yourself in over your head and unable to get caught up on personal finances, bankruptcy may be the choice for you.

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What is bankruptcy?

Bankruptcy is a legal declaration of the inability to repay debts. Personal bankruptcy is typically considered the last resort of debt management options due to high consequences and long-term effects on your credit report.

A bankruptcy stays on your credit report for 10 years, making it challenging to acquire credit and make purchases. Furthermore, bankruptcy is not a solution in all cases. Federal student loans, Federal tax debt and child support are exempt from bankruptcy protection. However, it is a legal procedure that offers a fresh start for people who can't satisfy their debts.

What type of bankruptcy should I consider?

Bankruptcy agreements vary but there are two types of agreements that most people choose: Chapter 7 and Chapter 13.

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When should I consider filing bankruptcy?

Bankruptcy should be a last resort. Do not file for bankruptcy unless you have thoroughly researched and attempted all other methods of debt relief. If you are in debt and you've exhausted all other options, filing for bankruptcy might be a probable path to financial freedom.

Just as serious financial difficulties don't arise overnight, bankruptcy won’t erase your financial burdens overnight. It takes time, responsibility and a commitment to keeping yourself free of debt to make any form of debt assistance work for you.

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Learn more about bankruptcy:
Bankruptcy advantages
Bankruptcy disadvantages
Tips for life after bankruptcy
* Debt Basics is not a lender or broker. We provide information and research on debt help and debt consolidation. Product and service offerings differ by state.