I’m in Debt, Should I File Bankruptcy?
It’s no secret that most Americans have debt. In today's economy, that debt is rapidly growing.

Unfortunately, for many of us, it can quickly become unmanageable.

Enter the debt collector. If you fall behind on payments, you can be sure that your phone will start ringing.

Unlike many Americans right now, these debt collectors have job security and they’re busy. The recession has given them more work than ever.

If you’ve reached the point of barely making ends meet while trying to pay your debts, you may have considered filing bankruptcy.

Just the word bankruptcy can seem a bit scary if you don't know the facts, so it's best that you explore your options.

The Automatic Stay: Stop Collection Efforts
One of the immediate benefits of filing bankruptcy is the protection of the bankruptcy automatic stay.

When you file bankruptcy, the court issues typically an automatic stay that orders creditors to cease all collection activity.

This gets the debt collectors off your back and can halt foreclosures and repossessions.

Which Type of Personal Bankruptcy Could Help Me?
You may have heard of Chapter 7 and Chapter 13 bankruptcy before, but many people don’t know what the differences are.

Each has its own specific features and by speaking with a bankruptcy lawyer and learning more, you can decide which option may be best for you.

Chapter 7 Bankruptcy
If you have a great deal of unsecured debt, such as credit cards, utility bills, payday loans or medical bills and you own little personal property, you may be a good candidate for Chapter 7 bankruptcy.

Chapter 7 bankruptcy is also referred to as liquidation bankruptcy because if a debtor owns non-exempt property, the bankruptcy trustee may choose to sell (liquidate) it and apply the proceeds to outstanding debts.

But don’t panic: each state has specific property exemptions, which gives a debtor the right to keep certain personal property. Many debtors who file Chapter 7 bankruptcy do not own any non-exempt property, so there is no liquidation.

In Chapter 7 bankruptcy, many unsecured debts can be discharged, meaning you no longer have the duty to pay them.

Recent tax debts, child support and some other secured debts cannot be discharged, but there are many that can, which can free up money to pay the obligations that must be satisfied.

Debtors must qualify for Chapter 7 bankruptcy under the means test. The means test considers the debtor’s income as compared to the median income for their state of residence.

If the debtor has enough income to make minimal payments on debts, they may not qualify to file for Chapter 7 bankruptcy; however, they may still be able to file for Chapter 13 bankruptcy.

Chapter 13 Bankruptcy
If you have had a temporary financial setback (such as a loss of income or medical emergency) but have a regular income and are able to repay manageable debts, you may be a good candidate for Chapter 13 bankruptcy.

Under Chapter 13, debts are reorganized. After filing, you and your bankruptcy lawyer must submit a proposed three to five year debt repayment plan to the bankruptcy court.

If the debt repayment plan is approved, you will make one payment to the bankruptcy trustee. The trustee then allocates the money to creditors.

If all payments are made on time during the repayment plan, remaining balances on unsecured debts may be discharged.

Chapter 13 bankruptcy can also be a powerful weapon against foreclosure.

The automatic stay stops foreclosure in its tracks and can give you time to catch up on payments and save your home.

New legislation may also soon give bankruptcy judges the power to modify the terms of mortgage loans.