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Bankruptcy

No one wants to have to claim bankruptcy. But, sometimes, it's the only choice that's left. Even though some people regard bankruptcy as a "get out of jail free" card, it's still one of the most difficult decisions to make. At one time, claiming bankruptcy was a rather easy and fairly harmless process, but with recent changes to credit card regulations, filing for bankruptcy can be more difficult. Make sure to understand how these changes can affect you.

There are typically two types of bankruptcy an individual can file for - Chapter 7 and Chapter 13. Chapter 7 allows for the full forgiveness of the debt that you and Chapter 13 allows for a full repayment of the principle debt without the interest rates.

But, now bankruptcy has become harder and little more intrusive. Due to new laws set in place, filing for bankruptcy requires that you take a "means test" that can prove that your debt is causing undue hardship if you want to be completely absolved of your debt under the ruling of Chapter 7.

If you cannot meet the requirements set up by the means test, then you will be required to file Chapter 13, which can allow you to continue paying on your debt, but without interest or penalty fees. This type of bankruptcy would be preferred by the debt companies because they would rather have something than nothing. Also, filing for Chapter 13 or Chapter 7 bankruptcy will require you to take mandatory credit counseling sessions.

If you think that you might be a candidate for bankruptcy, you may want to see if there are any other alternatives. Debt settlement and debt consolidation plans may offer you solutions that won't put the blemish of bankruptcy on your credit report.