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Myth #1: Chapter 13 Bankruptcy requires you to pay off all your debts

Not True: Chapter 13 Bankruptcy helps you keep property that you may be behind on (such as houses or cars) and also takes care of unsecured debts such as credit cards, medical bills and personal loans. How much of the unsecured debts you ultimately have to pay back is dependent on your income and your budget – many people pay 0% of their unsecured debts back!

Myth #2: You will be forced to sell everything you own

We wanted to point you in the direction of an interesting article that we found on MSNBC.com the other day. It's called, Debt Cut in Half? Don't Count On It. Written by Bob Sullivan, the article talks about the dangers of certain unscrupulous Debt Settlement firms, and what to watch out for.

Chapter 7 bankruptcy protection allows for the sale of a debtor's non-exempt property. The proceeds from the liquidation of assets are then used to pay off creditors. It is not uncommon for financial advisers and attorneys to steer their clients away from Chapter 7 and toward another form of bankruptcy protection. This is because while Chapter 7 is a good resource for debtors, there are better bankruptcy codes that offer more protection.

Chapter 11 Bankruptcy typically involves a partnership or corporation seeking assistance with the reorganization of debt. While this form of bankruptcy protection is designed for businesses, it can also be utilized by individuals.

When a business files for Chapter 11, it is one of two ways. Either the business owner or debtor files a petition with the Federal Bankruptcy Court or business's creditors submit an involuntary petition. In order for creditors to file an involuntary petition, a series of requirements must be met.