Many municipalities offer free financial counseling services, sponsored by local non-profit agencies, aimed at helping families or individuals cease credit card spending and offering advice on the best road to take to become financially solvent once again, with bankruptcy as a consideration.

When you’ve determined that this is the best solution for your financial woes, there is much to consider in selecting the type of bankruptcy for which you’ll file.  There are two basic types.  The most common, Chapter 7, is also known as liquidation.  If you choose liquidation, a trustee will be appointed to your case.  He will collect any non-exempt property, sell it, and distribute the proceeds to your creditors.

Chapters 11, 12, and 13 allow for the rehabilitation of the debtor and let the debtor use future earnings to pay off creditors.  A trustee is also appointed in these cases as well, charged with the duty of supervising existing and future assets.  There are advantages to both types and experts can best advise you on which way to file.

Remember that bankruptcy may be entered into voluntarily, when you deem it appropriate, or may be imposed upon you by your creditors.  Once creditors have filed, they may not attempt to collect debts outside of the proceedings.

Whichever plan you choose, it’s necessary to understand that bankruptcy will affect your credit score and future abilities to purchase high-ticket items with credit, such as homes and cars, or even make it difficult to rent an apartment.  That’s one of the major reasons why it’s necessary to seriously consider whether bankruptcy is appropriate for your situation and if you’ve exhausted all other options.

Expect record of your Chapter 7, 11, 12 or 13 bankruptcy to stay on your credit report for up to ten years.  Many credit reporting agencies, however, will remove it after seven.  Nevertheless, it will serve as a serious deterrent to any creditors who may think about loaning you money, as you’ll be considered a high-risk debtor.