IN THE LATE 90'S, THE TYPICAL FAMILY WHO FILED FOR BANKRUPTCY HAD A DEBT OF MORE THAN 1 ½ TIMES THEIR ANNUAL INCOME. A FAMILY EARNING $24,000 ANNUALLY HAD AN AVERAGE OF $36,000 IN DEBT.

There are many reasons for financial difficulties: the loss of a job, death of the family breadwinner, or too many credit card purchases. Money problems can create emotional struggles and are damaging to family relationships.

The thought of bankruptcy might initially be frightening. In fact, bankruptcy is a way to help you if you are unable to pay your bills. Bankruptcy will allow you to start over and get control of your financial future. You should not feel embarrassed about deciding to file bankruptcy, because in today’s economy people from all backgrounds are in similar situations.

The biggest fear that people have when considering bankruptcy is that they will never again be able to get credit. Bankruptcy will appear on your credit report for 10 years following the discharge, but this does not mean that you can not get a credit card, buy a home, or buy a car for 10 years. The fact is that you no longer have outstanding debts; therefore you have the ability to repay a loan. Since you are legally prohibited from declaring bankruptcy (Chapter 7) again for six years, this also is considered a positive by possible creditors.

There are 2 types of consumer bankruptcy that you can file:
Chapter 7 and Chapter 13.

Chapter 7 Bankruptcy is the most frequently filed kind of bankruptcy. It involves liquidating all of your non-secured debts. Most file Chapter 7 when their monthly payment on personal overhead (car, groceries, utilities, etc.) exceeds their take home pay. You are able to keep your home and car under most state Chapter 7 laws. The debtor receives a discharge of most unsecured debts within several months of filing the case.

Chapter 13 Bankruptcy forces creditors to settle with a debtor for less money than they actually owe. Chapter 13 applies when your income exceeds your monthly overhead and you are still able repay a portion of the debt back. To be eligible, you must have a regular income and your debts must fall below a certain level. Chapter 13 is frequently a better choice than Chapter 7 if:

• you owe debts that are not dischargeable in Chapter 7 (i.e. taxes or child support)

• you have liens that are larger than the value of the assets securing the debt

• you have several years of un-filed taxes

• you are behind on car or house payments

• your assets are worth more than the available exemptions

Before filing for bankruptcy, speak with an experienced attorney regarding the possible options that you have available to you. An attorney will help you manage your bills and work out payment plans with your creditors.

Bankruptcy proceedings begin with the filing of forms at the federal courthouse. The forms include detailed lists of your income sources, property, debts and living expenses. About a month after your forms have been filed, you will be required to attend a meeting with your creditors. Creditors will question you about your income, property and debts. The main purpose of this meeting is to determine the accuracy of your bankruptcy forms.

During bankruptcy proceedings, you will receive protection from bill collectors. They will no longer be able to contact you at your home or place of business during unreasonable times. The court will order your creditors to stop their collection activities, including lawsuits, wage garnishments, repossessions and telephone calls demanding payment.

Once your bankruptcy proceeding is complete, you will be given a "fresh financial start." The court order will end your responsibility for dischargeable debts.

Before deciding whether to file bankruptcy, you should consult with an attorney. An attorney will be able to help you make the choice that best suits your situation. He will also help you prepare your forms, attend meetings with your creditors and serve as your advocate with the judge, trustee and creditors. If you are unable to manage your bills, call an attorney to learn more about your rights as a debtor.