Don Taylor
Bankrate.com

Dear Dr. Don,
I have been thinking a lot about going bankrupt. I have had my credit cards for more than five years and the balances seem to keep going up instead of down. The creditors don't stop calling and I have gone to a debt-consolidation place and that didn't even make a dent in my credit balances.

My income-debt ratio is very high and I need help. I don't want to go bankrupt, but it seems to be the last choice I have. What is your opinion? And which kind of bankruptcy is best for me and how do I find out more about it?

Thank you,
Vexed Vanessa

Dear Vanessa,
In a Chapter 13 bankruptcy you work with the bankruptcy court to put together a repayment plan and over the next three to five years you pay down your outstanding credit obligations. At the end of the repayment plan the court discharges any remaining eligible debts. A Chapter 13 filing stays on your credit report for seven years, in contrast to a Chapter 7 filing, which stays on your credit report for 10 years.

A Chapter 7 bankruptcy is a liquidating bankruptcy where the bankruptcy court forms a bankruptcy estate from your nonexempt assets and uses the proceeds of the sale of these assets to pay down your unsecured debts. The classification of exempt and nonexempt assets varies by state. The court discharges all remaining eligible debts and you no longer owe any money on the discharged debts.

The U.S. Courts site provides a recently revised guide to the different types of bankruptcies called "Bankruptcy Basics." (You can find it in the library under "publications and reports.") Reading the guide is a good first step in deciding whether bankruptcy is right for you and, if it is, what chapter of the bankruptcy code makes sense in your situation.

You have some control over bill collectors calling you. If you notify them in writing that you want them to stop, then they can only contact you to let you know that they plan on suing you for the monies owed, or that they plan to stop the collection process. The FTC's Facts for Consumers on Fair Debt Collection explains in greater depth how to stop collection calls.

If you decide to pursue bankruptcy, my best advice is for you to discuss your situation with a bankruptcy attorney.

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