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If you are in a situation where your debt is spiraling out of control and there is no foreseeable way for you to make all of your monthly payments on time, you may need to file for bankruptcy in order to move forward. This might be the right choice for you, but there are several things that you will want to take into consideration before you move forward.

 
1. Recent Changes in Bankruptcy Law

There have been some recent changes in the bankruptcy laws that you will need to be aware of before you file. A great deal of rumors and myths have been spread around regarding these changes. The most important thing to understand is that bankruptcy protection itself is not going anywhere. It is still an option that you can take advantage of if it is the last resort. The changes in bankruptcy law are primarily centered around additional requirements that you need to meet, such as obtaining credit counseling before filing. Under some circumstances, you might be required to file for Chapter 13 bankruptcy rather than Chapter 7, but bankruptcy will still be an option when other possibilities have not been explored.

2. The Two Types of Bankruptcy

The two types of bankruptcy available to individuals are Chapter 7 and Chapter 13. Both offer the ability to wipe out your debts, but they are not equivalent to one another. With Chapter 7 bankruptcy, a great deal of your debts can be written off, but not all of them. When you file for Chapter 7 bankruptcy, you will lose the majority of your most important assets. Certain assets will be protected, however. In addition to this, a Chapter 7 bankruptcy stays on your credit report for ten years.

Alternatively, Chapter 13 bankruptcy allows you to set up a payment plan with your creditors that you can afford. In most cases the plan will take between three and five years to complete. This plan will be court ordered, and creditors have no right to attempt to change the plan after the court order. The payments are monitored by a trustee. This option allows you to keep more of your assets, and stays on your credit report for only seven years.

3. Not All Debt Can Be Removed

It is important to realize that bankruptcy does not necessarily remove all of your debt. A large portion of the debt will be forgiven, but you will still need to work out a payment plan in order to take care of the remaining debt. Student loans are one of the types of debt that can not be erased. Alimony and child support also can not be erased. The same is true of taxes owed.