• Bankruptcy may be the only option for those in extreme debt.Bankrupt. Businessman with empty pockets (with clipping paths) . image by Vitaliy Pakhnyushchyy from Fotolia.com
  
  In the first quarter of 2010 alone, almost 379,000 bankruptcy cases were reported. According to Credit Cards online, these figures indicate a 17 percent increase in bankruptcy compared to previous years. (See Reference 1) Consumers who live in states with a high rate of unemployment and home foreclosure account for most bankruptcy cases.
  
  

What Type Should I Choose?

• Before filing bankruptcy, be sure to consider the types that are available. According to the United States Courts online, there are six types of bankruptcy. Chapters 7 and 13 are typically filed by individuals. Chapter 7 bankruptcy is also known as Liquidation and is ideal for those who cannot repay their debts, even with a repayment plan. Individuals who file Chapter 7 bankruptcy must liquidate all assets. Chapter 13 bankruptcy, or "Adjustment of Debts of an Individual With Regular Income," allows an individual to repay debts over a proposed payment plan. This plan is ideal for individuals with a steady income. Chapter 13 bankruptcy also allows a debtor to keep their home. The other types of bankruptcy are designed for specific groups other than consumers: Chapter 9 bankruptcy is for municipalities; Chapter 11 is for organizations; Chapter 12 is for farmers and fishermen and Chapter 15 is for international issues. (See Reference 2)
  
  

How Do I File?

• Filing for bankruptcy can be a difficult and detailed process. Typically, debtors must collect all records of debts and assets, as well as a bankruptcy petition. Although an attorney is not required, debtors may consider hiring one to assist them in the process and file their case. In addition to a bankruptcy petition and statement of debts and assets, debtors often are required to pay court fees, which are usually due upon filing bankruptcy. These charges can be substantial, so be sure to check with the local bankruptcy office to plan ahead. Once the case has been filed, debtors will usually be required to attend a meeting of creditors, where they will be questioned about their case. (See Reference 2) Time in court is usually very limited for bankruptcy cases.
  
  

What are the Effects?

• Some of the effects of bankruptcy vary by chapter: for example, Chapter 7 requires liquidation of assets, whereas Chapter 13 does not. However, there are a few general effects of bankruptcy that do not vary by chapter. According to Alper Law online, most debtors cannot buy a home or car for at least four years after filing bankruptcy. Credit accounts will usually have higher interest rates, and bankruptcy can remain on a credit report for as long as 10 years. (See Reference 5)