Getting Out of Debt Fast

Should You Reduce Your Debt by Filing Bankruptcy

Are you having trouble paying your bills? Are your accounts being turned over to debt collectors? Are you worried about losing your home or your car? Should you reduce your debt by filing bankruptcy?

If you're not disciplined enough to create a workable budget and stick to it, can't work out a repayment plan with your creditors, or can't keep track of mounting bills, consider contacting a credit counseling organization to help you reduce your debt.

Filing personal bankruptcy generally should be the last resort as a means of reducing your debt because the results are long-lasting and far reaching. People who follow the bankruptcy rules receive a discharge - a court order that says they don't have to repay certain debts. However, bankruptcy information, including both the date of your filing and the date of discharge, stay on your credit report for 10 years and can make it difficult to obtain credit, buy a home, get life insurance or sometimes get a job. Still, bankruptcy is a legal procedure that offers a fresh start for people who have gotten into serious financial trouble and can't pay their debt.

There are two types of personal bankruptcy if you decide to reduce your debt by filing bankruptcy: Chapter 13 and Chapter 7.

Chapter 13 allows people who have a steady income to keep property, such as a mortgaged house or a vehicle, that they might otherwise lose through a bankruptcy process. The court will approve a repayment plan to pay off your debts during a 3 to 5 year period.

Chapter 7 is know as straight bankruptcy and will involve the liquidation of all assests that are not exempt.

Both types of bankruptcy may get rid of unsecured debts and stop foreclosures but may not be the best option in reducing your debt.