If you are overcome with debt and have little chance of getting out, you have probably considered filing for bankruptcy. There's no question that dealing with the aggravation and stress of debt problems can be very depressing, give you a very negative view of your prospects for the future, and even make you question your self-worth.

Filing bankruptcy is not without its own issues, but whatever you may have heard about it, filing for bankruptcy can be a very effective solution for many people. It will result in an immediate end to creditor harassment, and going through the process will give you a renewed sense of hope and the chance for a fresh start.

Chapter 7 bankruptcy is the quickest route to a new financial start, but you will only qualify for a Chapter 7 bankruptcy if you have very few assets and your monthly income falls below a minimum threshold. If you qualify for a Chapter 7 your unsecured debts will be wiped out, you will be able to keep many of your personal assets (as long as they have minimal value), and you will not have to enter into a repayment plan to satisfy your creditors.

However, there are some debts that will not be wiped out by Chapter 7. The most significant are taxes owed to the IRS or to a state government. You also cannot escape having to pay previously arranged alimony, maintenance or support payments, student loans, or fraud related debts. Also, secured debts (such as your house or car) must continue to be repaid unless you surrender the collateral.

In many cases a person's debts will not be this straightforward. For example, you may have accumulated a bit of equity in your home, or you may own a car which has some value. At the same time you may have a steady income but find it is just not enough to make all the payments or meet all the obligations you have taken on.

In cases like this Chapter 13 bankruptcy is often the solution recommended by legal and financial experts. Chapter 13 will allow you to keep on functioning more or less as before. The court will look at your assets, your debts, and your ability to pay and will set up a repayment plan that it considers the best possible scenario for both you and your creditors.

In order to meet the requirements of a chapter 13 plan your income must be stable, and you must have at least a minimal disposable income (after your monthly living expenses are taken into consideration.) It wouldn't make sense to structure a repayment plan that you could not handle. That is why in many cases your unsecured creditors will receive only pennies on the dollar.

Among other things a Chapter 13 removes you from direct contact with the creditors included in the plan. You make regular monthly payments to the trustee and the trustee then pays the creditors. As long as you continue making your regular monthly payments your creditors will eventually disappear. Usually this takes between 36 and 60 months. During that time your creditors cannot contact you directly.

This has some similarities to a debt consolidation plan. For example, in a debt consolidation plan a schedule of payments is arrived at, usually based on a negotiated reduction in the face amount of the debt.

But the differences are very significant. Most debt consolidation services charge a monthly fee for administering your account. You will also continue to be charged interest on the amounts you owe and you continue to be open to lawsuits brought against you by your creditors. These plans may also last much longer than a Chapter 13, and you are never quite sure if all your creditors will actually honor the arrangements agreed upon.

There are some fairly minor requirements involved in filing a Chapter 13 bankruptcy. In Milwaukee for example filing a Milwaukee Chapter 13 bankruptcy involves a court filing fee of $274. You also have to take a credit counseling course prior to filing and you must attend a meeting with the court appointed trustee to sort out the details of your case. You also must agree to take a court approved financial management course.