Bankruptcy should be considered as a last resort. It will not erase all of your debt. For example, you will have to pay child support, alimony, student loans, and taxes.

In a Chapter 7 bankruptcy, the things you own (your assets) are sold. The money from the sale is divided among your creditors (those you owe money to). You may be able to keep some items, such as a car and certain personal property, but you could easily lose some things you value. Filling Chapter 7 will stay on your credit record for up to 10 years. Chapter 13 bankruptcy is actually a plan to pay back your creditors. You make installment payments to the court and a trustee sends the money to your creditors. Generally, your creditors have agreed to accept less than the full amount owed to them. As long as you make your payments, you get to keep your property. A Chapter 13 bankruptcy stays on your credit report for at least 7 years.

Bankruptcy can affect other aspects in your life. You could be turned down for employment. It can follow you for years and make it difficult for you to buy or rent a home. Even if you are able to buy a new car or a new home, you could be charged a much higher interest rate.

Before filling for bankruptcy, you should seek credit counseling (Balance). They may be able to work with you and your creditors to set up a repayment plan.