What is Bankruptcy? Bankruptcy is a legal petition filed in federal court which you may seek a discharge of a debt when you can't pay your bills. There are two main bankruptcies for individuals: Chapter 7 and Chapter 13.

Can I use my credit cards? If you are seriously considering filing bankruptcy it is important for you to stop using your credit cards. The new bankruptcy laws require that you have 90 days of no use on your credit cards before you can discharge your debt.

When Should I consider filing for Bankruptcy? You should consider filing bankruptcy when you cannot pay your bills or when a particular crisis, such as an illness, accident or loss of employment makes the future payment of your bills very unlikely. Also, if a judgment is handed against you, a bankruptcy may be used to stop the creditor from attaching your assets or wages.

Can Bankruptcy stop collection of taxes? Taxes are normally given priority and are difficult to erase. Bankruptcy will initially stop the collection process but may not eliminate the obligation to pay the taxes.

Does a Bankruptcy affect my credit? Yes. Future lenders may consider your bankruptcy when they are deciding whether to loan you money or credit. However, certain laws exist to prevent unlawful discrimination against you just because you filed for bankruptcy. The fact that you have filed for bankruptcy may be carried on your credit records for ten years.

If I choose Chapter 7 liquidation, do I lose all my assets? No. Bankruptcy law lets individual debtors keep certain property that is not subject to attachment and execution under state law. These assets include some or all of the debtor's equity in his or her home, household goods, a car, certain retirement's plans and numerous other assets.

What is the cost to file a Bankruptcy? The filing costs differ based upon the Chapter of Bankruptcy you file. Currently, fees are $299 for a Chapter 7 and $274 for a Chapter 13.

How long does a Bankruptcy take? Do I have to attend a Hearing? Chapter 7 bankruptcies require you to attend a meeting of creditors. If no objections are filed, the discharge can be entered in approximately 90 days. Chapter 13 bankruptcies take 48 months and may involve a number of hearings over an extended period with both the trustee and the court.

Author's Bio: 

Kathleen Staley is the author of this article, and is associated with a preeminent San Diego bankruptcy law firm.