Are you overwhelmed with debt? Are you overextended, out of money and being harassed by creditors? If so, you might want to consider filing for bankruptcy. Bankruptcy is the option that people can pursue when they are grossly in debt and cannot pay their bills. Bankruptcy law in the United States allows for two types of bankruptcy: Chapter 7 and Chapter 13.



Bankruptcy in its most common form occurs as Chapter 7. This is where a person declares bankruptcy and is able to keep certain properties exempt while the rest is liquidated, sold and applied to the debt.

Chapter 13 bankruptcy is when a bankrupt individual reorganizes his or her debt. Bankruptcy in this form allows the filer to pay off his or her creditors over a 3-5 year period. During the bankruptcy time creditors can only attempt to collect the person's previous debt through bankruptcy court. Chapter 13 bankruptcies generally result in the bankrupt person being able to keep his property.

Bankruptcy law has undergone some change in the past few years. For instance, bankruptcy laws now require that individuals filing bankruptcy go through credit counseling. Bankruptcy law has also changed in that it now applies a means test. This test is to determine if the individual claiming bankruptcy earns less than the median income in the state where he or she lives.

If the individual earns less than the state's median income, he will be forced to file Chapter 7, give up ownership to certain properties and then debts will be cancelled. If the individual earns more than the state's median income, he or she will have to file Chapter 13 and work out a plan to repay all of their debts.

There are important things to consider before filing for bankruptcy. You should consult with an attorney who is familiar with bankruptcy law and proceedings. He or she can guide you as to which form of bankruptcy you would be required to take based on your personal information, income and amount of debt.