Pay Off Your Debts

It is a last resort, but one that may be the only option for some who are deeply in debt to get control of their financial situation.

The first step is to determine whether bankruptcy is the appropriate option for you. When making this decision, it may be helpful to discuss your situation with a reputable credit counseling agency that can explain your choices to you, including bankruptcy. If you choose to file for bankruptcy, it is important to understand the different types of bankruptcies and to know which applies to your situation.

Chapter 7 bankruptcy has been the most commonly filed. Chapter 7 bankruptcy is available to those individuals who cannot repay a significant portion of their debts. For those who do have the ability to repay a significant portion of their debts, Chapter 13 remains an option.

You've probably heard of Chapter 11 bankruptcy as it is pretty common in business, but doesn't apply to individuals. Chapter 11, like Chapter 13, is a "reorganization" type of bankruptcy. The organization stays in business while a bankruptcy court supervises the reorganization of the company's contractual and debt obligations. The court can grant complete or partial relief from most of the company's debts and its contracts.

Chapter 13 bankruptcies allow you to consolidate your debts into one monthly payment over a period of three to five years. For this type of bankruptcy, you must develop a reasonable plan for paying off at least a portion of your debt.

Bankruptcy and the laws that govern it are complex. It is strongly recommended that you seek the advice of a bankruptcy attorney to determine which type is most appropriate to your situation and how to proceed.