You may feel you don't have any other options.
Maybe you owe several people money, your credit is maxed out, and you are falling deeper into debt so you start to explore filing for bankruptcy.
You thought you never would, but you've heard about it, maybe even someone you know has done it and the question you want to know is when should you? All types of bankruptcies exist: chapters for businesses, individuals, even a chapter for farmers and fishermen.
First understand that two main types of bankruptcy exist for individuals:

• Chapter7 is a straight or liquidation bankruptcy, meaning the debtor's nonexemptproperty is sold to pay creditors.
  Because of the means test, this type ofbankruptcy is more difficult to file.
  
• Chapter13 is a repayment plan for individuals, usually allowing them 3 to 5 yearsto pay off their debt.
  

Chapter 7 bankruptcy accounts for almost two-thirds of all bankruptcy filings.
For those wanting a fresh start faster, Chapter 7 bankruptcy may be the bankruptcy to go with over Chapter 13.
The case is often over in less than 6 months and no minimum debt is required.
Additionally, with Chapter 7, debtors can sign a "Reaffirmation Agreement" where they can keep certain assets like a car or house while continuing to pay a loan or mortgage.
A negative of Chapter 7 bankruptcy, however, is that co-signors of a loan can be stuck with your debt unless they also file for bankruptcy.
File Chapter 7 bankruptcy if you:

• Havecompleted mandatory credit counseling.
  
• Areready to sell nonexempt property and distribute the proceeds to yourcreditors.
  
• Haveproperty left over so that when you are finished selling the property topay off your debt, you will be able to start over again financially.
  

Chapter 13 may be a more suitable choice if you have valuable property you want to keep or have too much income to file a Chapter 7 bankruptcy.
With Chapter 13, debts can be reduced and you have more time to pay off the debts that can't be discharged from either type of bankruptcy.
This type of bankruptcy allows you to separate creditors where they receive different percentages of payment so debts with a co-debtor can be treated differently than debts on your own.
Disadvantages to a Chapter 13 bankruptcy include having to use post bankruptcy income to pay off debts, incurring higher legal fees because filing Chapter 13 is more complex, not being able to file if you are a stock or commodity broker, and needing to be involved in the bankruptcy court process for as long as it takes you to pay off your debts (3 to 5 years).
File Chapter 13 bankruptcy if you:

• Havecompleted mandatory credit counseling.
  
• Have aregular income but need time to pay off debts.
  
• Meetthe debt limit.
  The limit varies but the most debt you can have for a Chapter13 bankruptcy is typically around $1 million.
  Unsecured debts have to beunder an amount around $300,000 and secured debts should be under around$700,000.
  
• Arenot filing for a corporation or partnership.
  
• Wantco-signors to be immune from collection efforts if the plan is a fullpayment one.
  

Now that you know the types of bankruptcy filings that exist, and have an idea of what type of bankruptcy might be best for you, don't stop there.
Most likely, there are other questions that you need answered.
Below are a few of the most common:

• Whateffect will bankruptcy have on my credit? Your credit history may alreadybe poor but keep in mind that a bankruptcy will remain on your credit forup to 10 years.
  Of course, credit can be re-established.
  
• Willmy coworkers, neighbors, and friends know that I have filed forbankruptcy? Though employers and landlords will not be sent notices orotherwise directly informed about your bankruptcy, anyone can find outthat you filed because bankruptcy is a public record.
  If a potentialemployer does a credit check, bankruptcy filings will show up on thatreport, which can seem like bad credit is on your record even years afterthe bankruptcy was filed.
  
• Willbankruptcy prevent me from having my wages garnished? Both Chapter 7 andChapter 13 grants protection against wage garnishment and creditorcollection.
  
• Whatdoes bankruptcy cover?
  • Credit card debts
  • Medical bills
  • Unsecured loans

• Whattypes of debts are not erased with bankruptcy?
  • Student loans
  • Alimony and support
  • Debts from fraud
  • Drunk driving compensation
  • Tax bills

Contact the organizations affiliated with these types of debts to work with them directly.
Under certain circumstances, income taxes may be discharged in bankruptcy.
Usually taxes must be at least 3 years, assessed at least 240 days prior to bankruptcy filing, and filed voluntarily at least 2 years ago.
Consult a tax professional regarding details.
With Chapter 13 bankruptcy, payment plans can often be worked out for taxes.
Other options exist to help with financial difficulties.
Contact a qualified tax professional to discuss your situation.