But it may not be the fresh start you think it is. A new report shows nearly one in three people who filed for bankruptcy last month, still had to pay off their debt.
According to the American Bankruptcy Institute, more than 114,000 people filed for bankruptcy in November.
That's a 13-percent drop from the month before, but it's a more than 2 percent increase over consumer bankruptcies filed a year ago.
While bankruptcy can bring relief from creditors, credit counselors caution: consider every other option first.
The truth of the matter is, when you file bankruptcy, some of the effects linger for years and years and years.
Chapter 7 bankruptcy, which wipes out most of your debt, stays on your credit report for 10 years. Chapter 13 stays on your credit report for up to seven years, and you still must repay many of your creditors on a payment plan.
The average debt management program through a credit counseling agency lasts, roughly about five years and affects your credit rating the same as a chapter 13 bankruptcy. They may also pay your payments late causing additional marks on your credit report. Payments through a Ch 13 plan can not be marked late.
By law, you must qualify for bankruptcy. Depending on your circumstances, you may be limited to chapter 13- the kind of bankruptcy that goes on your record, but still results in a court-ordered payment plan for your creditors. That's what happened to nearly a third of the consumers who filed for bankruptcy last in November.
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