If you feel overwhelmed with debt, you've probably thought about filing bankruptcy. Many people see bankruptcy as a way to completely erase all their current debts, and simply start fresh financially. Like any major financial decisions in life though, bankruptcy has both pros and cons. Let's take a look at an overview...

The first thing you should know about bankruptcy is there's more than one type. It's also good to know that there are differences in bankruptcy when businesses are filing instead of individuals. For the purpose of this article though, we'll concentrate on personal bankruptcy by individuals in the United States.

Chapter 7 is the most commonly used type of bankruptcy filing, because it allows to keep certain assets. Which ones you're allowed to keep depends on the asset's value, and the state you reside in.

For the most part, Chapter 7 bankruptcy allows you to cancel most types of insecure debt. There are things you're not able to wipe away though, these include child support, taxes, and certain student loans.

Chapter 13 is the other common type of bankruptcy for individuals. This type of bankruptcy is basically just a repayment plan. It's used for individuals who have enough disposable income to meet goals of a court approved payment plan. This payment plan usually strives to pay all debts within 3-5 years.

What many consumers don't know is that bankruptcy can be initiated by the creditors themselves. Commonly however, consumers are the ones to initiate the proceedings, because they feel it's the only way to get out from under the mountain of current debts they have.

Declaring bankruptcy gets creditors off your back. They're not allowed to call you about payments, garnish your wages, or file additional lawsuits against you for the debt. This is one of the most common reasons people choose to file personal bankruptcy.

Bankruptcy in the United States is heavily influenced by individual state laws, so specific details will change depending upon which state you live in.

You should also be aware that filing bankruptcy will be noted negatively on your credit report, and this record will stay in place for a full 10 years.

This article doesn't begin to cover the intricacies of bankruptcy in the United States. It is complicated, and it's a personal, individual decision. Be sure to research the specific laws in your state first. And it's probably best to consult with a professional before taking any actual steps towards filing.