With consumer debt and bankruptcy filings rising every year, it is important for all Americans to consider the real advantages and disadvantages associated with Chapter 7 & 13 Bankruptcy. Most people know that bankruptcy will create future credit problems, but they do not know the extent. Most people know that new laws for bankruptcy change the attractiveness of it as a option, but few people know how or why.

There are a number of reasons that people prefer alternatives to bankruptcy instead of actually filing. First and foremost, the long-term credit consequences of declaring bankruptcy can be profound. Chapter 7 Bankruptcy, for one, can remain on your credit report for 10 years. Chapter 13 is a less severe and stays on your credit for seven years, but this is still a very long time, not to mention the fact that in a Chapter 13 "reorganization" bankruptcy, you may have to pay the debt back in full anyway.

For most consumers, personal bankruptcy is a last resort after they've exhausted nearly every possible solution. First they will try budgeting and cutting back any unnecessary expenses. Then they will try nonprofit debt counseling, but they won't be able to afford the monthly payment.