Bankruptcy debt is often misunderstood these days and unfortunately, that can cause many problems. If you are considering bankruptcy then there are a number of things that you will need to familiarize yourself with. First, you need to know which types of debt are often exempt from bankruptcy and you need to understand the different types of bankruptcy available too.

What you may not realize is that there are different chapters of bankruptcy that you can file for. There are many different chapters but there are two main ones that you should familiarize yourself with and these are Chapter 7 and Chapter 13 bankruptcy.

Chapter 7 bankruptcy is what most people imagine bankruptcy to be. It eliminates your debt and you have the opportunity to start a fresh. The negative aspect of this type of bankruptcy debt is that it can stay on your credit report for up to 10 years. It will make life a lot more difficult too, especially if you ever need credit again. Lenders look at your credit report to determine whether they will lend you the money or not. If they see Chapter 7 bankruptcy on your report then they will definitely think twice about lending you the money. Remember, from a lender's perspective, the approval or rejection of your loan as well as the interest rate that is set for you reflects the lender's assessment of how much of a risk you will be. Even if you have collateral, the lender really does not want your car or plasma TV if they need to take it if you default, they would much rather be paid.

Chapter 13 bankruptcy would be the preferred type of bankruptcy for those who have experienced problems due to a job loss or accident and illness. It basically involves arranging to pay back the bankruptcy debt that is owed to each creditor over a period of time. You pay the money back in installments. This chapter of bankruptcy will stay on your credit report for up to 7 years but it will not look as bad as a Chapter 7 bankruptcy debt would. Note the key difference here is that with Chapter 13, your debts are not wiped out or eliminated, but instead are simply reorganized so that you can afford to make payments on them.

There are so many things that you need to think about before you decide to file for any type of bankruptcy. One thing that needs some serious consideration is what type of debt you have.

If you have student debts or tax liens then they are usually exempt from bankruptcy and you will still owe the creditors money. That is right, outstanding debts such as tax liens, federal student loans can not be wiped out or eliminated via any form of bankruptcy. If you have a loan secured on your home, then again you could still lose the home when you are declared bankrupt. Bankruptcy is never an easy option to get out of debt and it will affect your life negatively for up to 10 years.

Overall, you should always look at the alternatives that you have before you file for bankruptcy. Perhaps a consolidation loan would better help you. Or perhaps a credit counselor could show you different ways in which you can get out of your debt. Only consider bankruptcy if you have looked at all other alternatives as bankruptcy debt is not an easy thing to deal with and requires serious thought and consideration.