Bankruptcy is frequently disfavored because of its far-reaching and long-lasting effects on a consumer’s credit report. Consumers that have a debt level that is impossible to handle based on their income should never take bankruptcy “off the table”, however, because it might offer the only way to a fresh start.

Typically, bankruptcy remains on your credit report as a negative item for either 7 or 10 years, depending on the type of bankruptcy that you complete. As a result, you may have difficulties:

• Buying a home or car when financing is required
• Getting a job – some employers evaluate a potential employee’s credit report prior to hiring

In order to file for bankruptcy you need to file with a bankruptcy court in your local judicial district, based on your primary residence. Each state has one or more districts, and there are 90 bankruptcy districts across the United States. As a result, it is important that you hire a local bankruptcy lawyer.

For individuals, there are two options for bankruptcy relief and both options give a judge the control to determine what assets you are allowed to keep and how much of your debt is actually relieved.

Chapter 7: Liquidation Under the Bankruptcy Code – bankruptcy where personal assets are sold (liquidated) to pay off creditors. Some property is exempt; this varies by state.

Chapter 13: Individual Debt Adjustment – bankruptcy where a debtor is allowed to keep property and pay off debts through a repayment plan generally lasting 3 to 5 years.

Whether married couples need to file jointly depends on how their debts are listed. Generally, if only one spouse is legally liable for most of the debt, only that spouse would file. If both spouses are liable, then the spouses will normally file a joint petition. However, each spouse can file separately as well.

Filing for bankruptcy puts into effect an “Order for Relief” — known informally as the “Automatic Stay.” The Automatic Stay immediately stops most creditors from trying to collect what you owe them. So, at least temporarily, creditors cannot legally garnish your wages, empty your bank account, repossess your car, foreclose on your house or other property, or cut off your utility service or welfare benefits.

Do note, however, that in certain occasions the creditor can ask to have the Automatic Stay lifted in order to foreclose or repossess on your property.