Bankruptcy
On this site, I tend to refer to bankruptcy as the "nuclear option", as it often can be most effective as a threat to force creditors to come to the table and negotiate. In general, you should try and do everything you can to avoid bankruptcy.
Bankruptcy and credit card debt
In fact, for most people with high levels of credit card debt, bankruptcy CAN be avoided altogether, if they follow one of the other strategies outlined on this site.
Since credit card debt is unsecured debt, there is no direct collateral for this debt. For instance, with a car loan, if you do not make your payments, your car can and will be repossessed by your creditor. The same holds true for home loans - fail to make mortgage payments, and your creditor will foreclose.
BUT with credit card debt, when you fail to make payments, the credit card company might send nasty letters and refer you to a collection agency, but since the line of credit the extended to you had no collateral, there is nothing they can repossess. In fact, aside from damaging your credit, there is really not much they can do, aside from filing a lawsuit to collect the money you owe, and this takes a good deal of time and effort.
Bankruptcy alternatives - time is on your side
In general, when dealing with credit card debt, time actually can be on your side. As a general rule, the longer an outstanding debt is due, the less it tends to be worth to a creditor. What this means to you is that if you are already not making payments on your credit cards, the longer the time that has passed from the date of your last payment, the more likely the credit card companies are to reach a settlement with you.
Now, if you are still current on your payments, BY ALL MEANS please keep making them if you are able. Consider your bankruptcy alternatives: consolidate your debts using BALANCE TRANSFER to a card with a low or no interest grace period, or perhaps even consider DEBT CONSOLIDATION, if your payments are becoming unmanageable or if you are unable to qualify for a low interest card deal. Another option is DEBT MANAGEMENT COUNSELING . This is often best for those whose debt arose out of short-term problems such as illness or unemployment.
In any case, keep current on your payments and, assuming you have followed our prime directive and stopped spending, eventually pay down your debt and start saving.
"Credit Card Bankruptcy"
But if you are behind on your payments, you MUST UNDERSTAND that it isn't the end of the world. Don't be one of those who rushes into bankruptcy out of ignorance or out of irrational fear of debtors. There are far easier ways of getting the collection agencies to stop calling, including employing any of our previous STRATEGIES, and there are many other ways to get debt relief that are less extreme and cause less long-term damage to your credit record.
If all else fails...
If you have tried everything and attempted the other strategies outlined on this site and your debt is out of control and perhaps you have one or more judgments against you from lawsuits filed by creditors, bankruptcy can be a viable option. Just do yourself a favor and study up on your alternatives first, and make sure you truly have no other options.
If this is the case, then first familiarize yourself with the different kinds of bankruptcy to determine which might be best for you. The two main types of bankruptcy for individuals are Chapter 7 and Chapter 13.
Chapter 7
Chapter 7 is also know as straight bankruptcy or liquidation bankruptcy.
Chapter 7 allows consumers who fall below a designated income level (the median income for their family size in their state) the opportunity to eliminate their debt and get a fresh financial start. In exchange, all your "non-exempt" assets are liquidated (or sold), with the proceeds being divided amongst your creditors.
Every state has laws defining what assets are exempt from liquidation. In Chapter 7 bankruptcies, auto repossessions and mortgage foreclosures can be halted by court order while the case is under consideration.
Chapter 13
Chapter 13 bankruptcy is known as wage-earner's reorganization. The idea with Chapter 13 Bankruptcy is that the debtor pays a portion of his or her debt over a three to five year time period.
This is done by the debtor making a series of payments governed to a court approved plan administered by a Chapter 13 trustee. If any debt remains at the end of this payment plan, that debt is discharged.
If you decide to file
If and when you decide that bankrupt cy is the right path for you, it is important that you find a bankruptcy attorney in your area that is right for you. Check with your local bar association for references.
Best of luck with whatever path you might choose!