Mounting debts can be problematic to deal with, especially when family responsibilities make it difficult to pay back your creditors. There are several ways through which you can manage your debts, the most popular being debt consolidation and bankruptcy. Though there is a lot of stigma attached to bankruptcy, it is more common than you think and can be a great way to get rid of your debts. Every year hundred thousand of people file for bankruptcy and successfully get rid of their debt too. In case you are contemplating of using this method to get out of your monetary problems, you should know how the process works.

Individual debtors can file for bankruptcy under chapter 7 or chapter 13. However, before filing for bankruptcy, you need to find out whether you are eligible to file for it or not. Another important point to consider would be whether filing for bankruptcy is the best solution for you or you should consider any other alternate.

Bankruptcy filing is displayed on your credit report which might make it difficult for you to get fresh credit if you want to buy a new house or car. Moreover, there are several criteria that need to be fulfilled for a person to be eligible for bankruptcy. If you wish to find out the eligibility criteria for bankruptcy filing, you can ask for a free legal evaluation to weigh your options.

Once it is decided that bankruptcy is the best way to get rid of your debts, you need to find out which chapter of bankruptcy you can apply under. Individuals who have an average household income less than the state median can file for Chapter 7 while those with an average household income higher than the state median can consider Chapter 13 to repay your loans.

If you are able to qualify for Chapter 7, you might not have to pay your creditors anything; only your non-exempt property will be liquidated to pay some amount to the creditors. The process is completed within 4-6 months of filing bankruptcy papers and you get a bankruptcy discharge after that.

In case you file for Chapter 13 bankruptcy, you will be paying some amount of your debts to your creditor through a repayment plan devised on your disposable income. This process continues for 3-5 years depending on your debt. Any unsecured debts that remain after this time are discharged. Once you clear your debts, you can begin your life afresh.

Not all debts that you owe will be eliminated when you file for bankruptcy. Debts which are secured because of a collateral, e.g. car loan, home loan etc. cannot be discharged. Since the creditor has lien over the property, then can repossess or foreclose the property. only unsecured debts like credit card bills, medical bills, unpaid utilities etc.

Additionally, filing for bankruptcy can also help you with wage garnishment as well as other collection methods including creditor harassment, foreclosure, or repossession, apart from offering you relief from tax debt.

If you thought that on filing for bankruptcy you will end up losing all your assets, you are mistaken. Bankruptcy is designed to offer people a new financial start. Thus, there are several provisions provided by both state and federal government to protect your property. You can use either of these exemptions to protect your home, car, your possessions, work tools, wages, retirement accounts, social security as well as disability benefits. Usually, the exemption amount is fixed to a dollar limit, which varies from state to state.