If you’re on the brink of filing bankruptcy, there are some things that you should know before you do so because it isn’t as easy as you think it’s going to be.  First and foremost, you have to make sure that you’re ready to declare it.  My rule of thumb is that if you can’t pay off all of your debts in the next 6-7 years, I would seriously consider it.  If you can pay them off and get another job, then do that because it will save you a lot of stress and more importantly, your credit score.

The first thing we need to look at is how you can file and it can be filed in different ways, which I’ll explain here:

Chapter 7:  Chapter 7 will start you all over and wipe you free and clear of your debts and finances.  Your debts are generally cancelled and once your case is finished, you will be able to start from scratch.

Chapter 13:  Chapter 13 is a little different than 7 because you’ll get a pay back plan from the court where you’ll have to pay back your creditors.  Bankruptcy laws are very strict in today’s environment and you may fall into this category so that the creditors can get their money back from you.

Before you declare any type of bankruptcy, I would advise you that you meet with a consultant that specializes in this field.  The sit down fee is usually fairly cheap and can save you a lot of hassle.  This consultant will be able to tell you if you should declare or not and help you along with the process.  This is a lot easier than doing it yourself.

If you do decide you’re going to take the plunge, expect a few months ahead of time to get everything settled.  You’re going to most likely have to talk with an attorney, and set up court dates, etc.  Most people find that this process takes about 3-4 months depending on the current economic climate, etc.  Obviously if the economy is in the tubes, you may find that others are filing at the same time.

In the end, you have to remember that it ruins your credit, you’re going to have higher interest rates and getting credit is going to be next to impossible to get.  I recommend that you think long and hard to determine if it is truly the right thing to do.