These days many people are becoming interested in finding out how to claim bankruptcy, which is a situation that arises when individuals can no longer service or repay their debts.

It is not always the individual themself who files for bankruptcy. In some situations a creditor can file what is called a bankruptcy order against the individual who owes money. This will proceed whether the individual likes it or not.

The process itself is fairly straightforward, but bankruptcy should only be entered into as a very last resort, as it’s effects are far reaching and life changing.

So what are the pros and cons of Bankruptcy?

Probably the most attractive advantage of filing bankruptcy is the fact that, under chapter 7, an individual emerges debt free. True, some debt cannot legally be written off, such as alimony or government tax to name two, but the majority of debt is removed, allowing a fresh start.

Coming out of chapter 7 has 2 main disadvantages.

The main disadvantage is that the majority of your possessions are liquidated to pay your creditors.

Also, those with whom you have dealt with financially in the past will be unlikely to want to deal with you again. For example, a bank account will be difficult to obtain.

This may not necessarily be the case though, as the above refers to the chapter 7 bankruptcy laws.

New laws introduced in 2005 make all bankruptcy applicants undergo a financial means test.

Should you fail the means test, (your income is deemed sufficient to be able to repay your debts over 3-5 years), and your income is found to have been above the median for a family of your size in your state over the past 6 months, you are precluded from filing chapter 7 and have to file under chapter 13.

No personal property is liquidated under chapter 13, but all debt is repaid under a 3-5 year repayment plan.

The repayment plan under chapter 13 is arrived at after a series of complex tests which can sometimes serve to inflate the true amount of an individual’s earnings, making the repayments rather high as a proportion of income. This can be quite difficult.

After bankruptcy, rebuilding one’s credit score is vital. Your credit record will retain details of a chapter 7 bankruptcy for a period of 10 years and a chapter 13 for 7 years.

Should you require additional free inShould you requiremation on how to claim bankruptcy and the various chapters and how they work, go to www.howtoclaimbankruptcy.net