Before you declare personal bankruptcy, there are a few things you should keep in mind. Personal bankruptcy is a serious financial step which you should not take lightly, and you should always look into other alternatives before filing your request with the bankruptcy court. That's not to say that bankruptcy is not a viable option for many individuals. It just means that you should be careful to make the best decision possible for you and your family.
The first thing you should realize is that there have been some changes to the bankruptcy law. Congress passed a law in 2005 which makes it more difficult (but not impossible) for some people to declare personal bankruptcy. The idea is to make sure that you really are struggling financially and cannot afford to pay your bills before allowing you to file chapter seven.
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Chapter seven bankruptcy, by the way, is what most people think about when they hear the term bankruptcy. The point of chapter seven is to try and wipe out your debts without any kind of repayment plan. The new bankruptcy law established a means test which means that you have to go through a more intense process in which you document your income and expenses. If your income is less than the median income for your state, then this test will not apply to you because it is obvious that you don't make much money.
However, if your income is higher than the median for your state, then you'll have to go through the means test to prove that you really need bankruptcy. In the end, most people that would have qualified before will probably qualify even under the new law. It simply will create more of a hassle for you and your lawyer, and there are other requirements such as mandatory financial counseling.
If you do not pass the means test, you'll have to file chapter 13 bankruptcy which creates a repayment plan for the next 3 to 5 years.
Before you declare personal bankruptcy, you should remember that it will have a significantly negative impact on your credit rating (although this might not be your priority if you are really struggling financially). There's certainly life after bankruptcy, but filing chapter seven or any other bankruptcy is still a serious and difficult step to go through.
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