Bankruptcy occurs when a process is initiated whereby a debtor obtains court ordered relief from having to pay off his or her debts. It can be of great use in certain cases, but is not advisable for use by everyone that faces financial difficulties. In fact, there is no easy and quick answer to the question of whether to declare bankruptcy or not. It needs discussing with a credit counselor or a bankruptcy attorney who is best able to evaluate the costs as well as benefits of bankruptcy in a person's individual financial situation.

The Type of Debt Can Influence the Ultimate Decision

Before one declares bankruptcy, the type of debt owed should be taken into consideration as it plays a significant role as do other factors that can influence the decision of whether to declare bankruptcy or not. There are certain initial considerations that can affect the final decision as well as the form of bankruptcy that a person chooses.

Some important initial considerations that can affect the decision whether to declare bankruptcy or not include whether the debts are dischargeable or not in bankruptcy, whether to keep part or all of the debt, relative costs as well as benefits of bankruptcy as also the financial future following bankruptcy. Also, one need to consider what effect declaring bankruptcy can have on one's employment as well as prospective employment, and how credit records will affect one's ability to rent or purchase a residence.

Sometimes, filing for bankruptcy may not provide relief and it would require advice from a lawyer or credit counselor to see whether or not one qualifies for discharge. Also, one may not want all of the debts to be resolved through bankruptcy, and if one regards certain personal items (such as cars) to be indispensable, choosing an option other than bankruptcy would be more advisable.

Declaring bankruptcy may not just wipe away everything from the slate and give a person the right to start all over again with a clean sheet. Debts need to be paid at least in part and one can also run the risk of having some personal property used to satisfy debt. Also, bankruptcy gets to be placed on one's credit record and may remain so for seven to ten years.

All said and done, before one declares bankruptcy, one should weight the pros and cons as well as decide on which form of bankruptcy to choose. However, because of the nature of personal bankruptcy, many bankruptcy lawyers will offer their services on a voluntary basis, though for simple bankruptcies, a fixed fee may be charged for the entire case.