Bankruptcy provides people who are drowning in debt with a way out – a way to start again. It must be remembered that bankruptcy It is not a quick fix or a holiday from responsibilities.

In most cases, people who choose bankruptcy are at their wits end and want the endless calls from creditors and debt collectors to stop. Bankruptcy takes care of that. After you file for bankruptcy creditors will be notified and must, by law, cease any actions against you, including harassing phone calls. In addition, your estate will be protected by an “automatic stay” which prohibits creditors from attempting to collect debts without the permission of the bankruptcy court. This provides you with protection from creditors who may attempt to collect on the debt by foreclosing on your home, repossessing your car, evicting you from your apartment, garnishing your wages or cutting off your utilities.

The two most common types of bankruptcy are Chapter 7 and Chapter 13.

Chapter 7 is a viable option for people who can pay their basic monthly expenses but have no money left to pay their debts. If you choose Chapter 7 bankruptcy, a trustee will be appointed by the bankruptcy court to oversee the proceedings and ensure your creditors are paid as much of what you owe them as is possible. Most of your unsecured debts will be written off within 90 days and many of your belongings and property will be sold, with the proceeds distributed to your creditors. In most cases, this means you will lose your home (if you own it) and will have to sell expensive objects such as jewelry, art and pricey electronics. The bankruptcy will stay on your credit report for ten years.

Chapter 13 is recommended for debtors who've fallen behind on debt payments because of a temporary problem (such as a job loss – or catastrophic medical expenses) but who want to repay their creditors. When you file for Chapter 13 bankruptcy you are relieved of interest payments and have three to five years to repay creditors. You can keep your home and your belongings but must show that you have sufficient income to live and pay off your debts. This type of bankruptcy remains on your credit report for seven years.

Declaring bankruptcy is a serious decision that will affect your life and the lives of many others. Consider your decision carefully and hire a bankruptcy lawyer and financial adviser to assist you before and after you file.