A bankruptcy is a legal process to eliminate your obligation to pay some or all of your debts. The two most common types of bankruptcy are chapter seven bankruptcy and chapter thirteen bankruptcy. In a chapter seven bankruptcy, you are being released of your obligation to repay most bills, collections, and judgment completely. In a chapter thirteen bankruptcy, you will be required to repay a large part of your debts, without interest over several years. This is common if you have too many assets to declare chapter seven.

Many people want to get out from underneath many of their bills or collection accounts. Sometimes due to uncontrollable events a person could find themselves with more debt than they can pay back in a reasonable amount of time. Before you declare bankruptcy, there are a few things you should consider.

First, will it be impossible to get your budget under control without bankruptcy? Many times if you just rearrange things you’ll find that with a little sacrifice you can get out of debt in a few years.

Second, are you ready to have a very negative brand on your credit bureau for many years? Once you are out of a bankruptcy you don’t start at the beginning again you start below that, with no positive credit, And with the black mark of a bankruptcy on your credit. 

Next, has the situation that caused you to get into all this debt and bad credit changed? If you are still not making enough or still incurring large bills you can’t handle, get divorced, or any other thing that will make it difficult to get through without picking up some big debt, don’t do it. There aren’t many good reasons to declare bankruptcy now and then end up in the same predicament later with worse credit. 

Finally, are you prepared to change? Many people that declare bankruptcy are in this situation because they were not responsible. Maybe they used a credit card too much, bought things that weren’t in their budget, or maybe they didn’t feel like paying their bills because they wanted to use that money for something else.

You need to be completely ready for a bankruptcy, it’s after effects, and the road ahead if you are going to consider a bankruptcy. Getting into a bankruptcy before you have taken a careful look at the situation will lead you back to the same rut you are in now, maybe even worse.