Hi friends, thanks for downloading the Money Girl Podcast. I'm Laura Adams.

If you've ever been over your head in debt, you may have wondered whether you should file for bankruptcy.

I'll tell you the advantages and disadvantages of declaring bankruptcy, the truth about five common myths, and when

bankruptcy might be the right decision for you.

Bankruptcy is a system of federal laws that allows individuals and businesses to get relief from debts, so they can make a fresh financial start.

It was created to help an honest but unfortunate debtor forge a new future without pressure from creditors trying to collect pre-existing debts.

The most common types of bankruptcy for individuals are called Chapter 7 and Chapter 13.

A Chapter 7 bankruptcy liquidates all your non-exempt assets to pay off creditors. It's generally the best option when you have a large

amount of unsecured debt, like medical bills and credit cards and little income.

A Chapter 13 bankruptcy reorganizes or adjust your debt using a repayment

plan. It's the best option if you have income, but want to avoid foreclosure of your home or

need time to catch up on outstanding debts. The immediate advantage of filing

bankruptcy is what's called an automatic stay, which puts your creditors on notice

that they have to stop trying to collect money from you.

The stay prohibits creditors from calling you, sending collection letters, filing lawsuits, garnishing your

wages, or seizing any of your assets, except in a few cases, such as in the collection of

alimony and child support.

If you have a successful bankruptcy case, the court will issue a discharge of certain debts,

which means you won't have to repay them.

Making your creditors disappear sounds like a dream come true, right?

But filing bankruptcy has a dark side.

Except in rare instances, it doesn't discharge debts from mortgages, student loans,

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