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The number of consumers seeking answers to bankruptcy questions is on the rise, according to information gathered from the American Bankruptcy Institute. That organization tracked a 14% increase in bankruptcy filings during the first six months of 2010, for a total number of 770,117 bankruptcy filings. This is the highest number of bankruptcies recorded since 2005, just before the Bankruptcy Abuse Prevention and Consumer Protection Act took effect. According to the ABI, the record number of bankruptcies can be blamed on high amounts of consumer debt coupled with high levels of unemployment and the housing crisis. The agency predicts that the number of consumers filing for bankruptcy will reach 1.6 million by the end of 2010.

As record numbers of consumers consider bankruptcy, the following top four questions are probably foremost in their minds:

What are the different bankruptcy chapters?

Most consumers are faced with the decision to file for Chapter 7 or Chapter 13 bankruptcy. There is also Chapter 11 bankruptcy, but that is generally reserved for businesses. Chapter 7 is also known as a liquidation bankruptcy, in which most of your assets are auctioned off to pay your debts. You are allowed to keep certain assets by law. Chapter 13 is also known as reorganization bankruptcy, in which you work with your creditors to establish a repayment schedule for your debts. Of the two, Chapter 7 is the most common form of consumer bankruptcy.

Should I file for bankruptcy?

This is a deeply personal question that only you can answer. Bankruptcy can cause severe damage to your credit history for years after you file. On the other hand, if you are in danger of losing your home, car, or other valuable property to creditors, you need to act swiftly and surely to protect yourself. Consulting with a consumer credit counseling agency or bankruptcy attorney is advisable.

What are any alternatives to bankruptcy?

Depending upon the severity of your situation, you may have alternatives to filing for bankruptcy. A reputable consumer credit counseling agency can help you determine if bankruptcy is the best choice. If not, your counselor can work with your creditors to arrange a payment plan and cease further collection efforts.

Should I hire a bankruptcy attorney?

Many people choose to DIY their bankruptcy filings, but this is generally not recommended. Bankruptcy law is complicated and varies from state to state, making it advisable to hire a lawyer who specializes in bankruptcy in your state. To find an attorney, consult the American Bar Association website for lawyers licensed to practice in your area.

Source: Credit Loan