by 
The Curious Bag
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If your debts are overwhelming and you feel that it will prove impossible to pay them off now or in the future, you may consider filing for bankruptcy. A successful bankruptcy can help you minimize or eliminate your debts.
Facts
When you file a bankruptcy petition, you will have to undergo a means test. This is the process by which the bankruptcy court evaluates your finances and decides the type of bankruptcy for which you are eligible.
Types
The court may assign you to a Chapter 7 or Chapter 13 bankruptcy. A Chapter 7 bankruptcy liquidates assets to discharge your debts while a Chapter 13 allows you to keep property and repay a portion of your debts over time if you have a regular income.
Time Frame
A Chapter 7 bankruptcy can be discharged within three months, while a Chapter 13 bankruptcy will not be discharged until you have completed your repayment obligations.
Benefits
Once you file for bankruptcy, an "automatic stay" goes into effect. This prevents foreclosures, repossessions and creditor lawsuits.
Effects
A bankruptcy is very detrimental to your credit score and can appear on your credit report for seven to 10 years, depending on which type of bankruptcy you file.
Source:
MoranLaw.net: Bankruptcy in Brief--Means Test
Nolo: Bankruptcy FAQ: Chapter 7 and Chapter 13
More Information:
Cornell University Law School: Bankruptcy
Bankruptcy Rights: What to Expect Once You Apply for Bankruptcy
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