The two basic forms of Bankruptcy protection for consumers are Chapter 7 and Chapter 13. Chapter 7 Bankruptcy protection essentially wipes away your debts (excluding student loans, tax debts) and gives you a clean slate while allowing you to keep your home. Chapter 13 protection basically amounts to a court mandated "monthly settlement" amount based upon your expenses and income.

Bankruptcy protection ends the harassing phone calls from bill collectors and does wipe away most of your debt if you qualify for Chapter 7 protection. If you do qualify for Chapter 7 protection, it is often possible to re-establish credit shortly thereafter.

• Few Qualify for Chapter 7:In October of 2005, there was a major change to the bankruptcy laws which ultimately made it very difficult to obtain Chapter 7 protection. Now to qualify, you must pass the "Chapter 7 Means Test" which is used to determine if you can make some minimal payment each month to your creditors (sometimes as little as $50 per month). The law is literally so strict that it has become all but impossible for most Americans to qualify for Chapter 7 protection. Basically, if you had enough income to rack up a large enough debt burden to need bankruptcy protection, you probably are making too much to qualify for Chapter 7!
• Higher Interest Rates: You can expect to pay higher interest rates for years to come after filing for Bankruptcy protection which ultimately lowers your purchasing power because it costs you more to borrow.
• Chapter 13 Protection Requires 5 Year Repayment Plan: Chapter 13 is no "quick fix" for your debt problem. A Bankruptcy judge will ultimately determine the amount of your minimum payment to your creditors based upon your expenses and income - then require you to pay this amount for the next 5 years!
• Sell Off All Your Property Not Legally Protected: If you do happen to qualify for Chapter 7 Bankruptcy protection, the law requires you to liquidate all of your assets in order to pay creditors. While your home is protected, most of your other assets will be vulnerable.
• Cost $1,000 or More: Bankruptcy attorneys charge you based upon the amount of your overall debt and the complexity of your financial situation. At a time when you can afford it least, you will need to pay out an additional $1,000 or more before the bankruptcy will be processed.

In the end, Bankruptcy should always be considered an option of "last resort" when it comes to debt relief!