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    Bankruptcy is a procedure that is designed to relieve debt
    to consumers who have fallen on hard financial times and
    cannot afford to pay their existing debts.

    While there are many types of bankruptcy out there, the
    most commonplace are chapter 7 bankruptcies and chapter 13
    bankruptcies of the bankruptcy code.

    Chapter 7 is the most common for the individual. It is the
    complete erasing of qualifying debt. The debtor is then
    released from all repayment obligations. But chapter 7
    bankruptcies are not to be taken lightly.

    While giving you an immediate fresh start in repairing your
    finances, it remains on your credit report for 10 years.
    You will be looked at as a high credit risk and financially
    irresponsible.

    Chapter 13 is less harmful to your credit. Though there are
    still marks against you, since you will be working to repay
    your debts on a payment plan, you do not look like you are
    financially irresponsible, though you are still considered
    a slight credit risk. Also, your qualifying assets will not
    be sold with the chapter 13 bankruptcy like they would in
    the chapter 7.

    In 2005 an act passed legislation that now makes it more
    difficult for individuals to receive a chapter 7
    bankruptcies. There are now terms to be followed such as
    pre-filing credit counseling and post-filing financial
    education.

    So when considering your file for bankruptcy, it is
    important to weigh the sides between chapter 7 and chapter
    13. Which one will do you more harm than good when it comes
    to solving your financial problems?