Lately there has been some information floating around about informal bankruptcy. It was even mentioned in Parade Magazine in the Sunday papers. While the outcome might seem the same as a legal bankruptcy filing, it is not a good solution to financial problems.

In an informal bankruptcy, a debtor essentially just stops making payments on their outstanding debt that they no longer want to pay. In most cases this is their credit-card debt. The feeling is that the strikes against their credit for non-payment will disappear in 7 years, while bankruptcy will appear for up to 10 years.

The problem with informal bankruptcy is that you are offered no legal protection from debt collectors. The debt never goes away, it is just not collected. The creditor can take you to court and get a judgment against you that allows them to place a lien on your home and in some cases attach your assets.

While Texas has some automatic protection for homesteads, vehicles and personal property, the protections will disappear upon your death leaving your loved ones to deal with the consequences of the debts.

Filing for Chapter 7 or Chapter 13 bankruptcy protections in a bankruptcy court will allow you to legally clear your debt. The creditor will have no legal claim to your assets or income once the court issues the discharge. These legal protections may cost you more up front, but save you countless hours of stress and lots of money in the long run.

Many people end up getting in over their head with debt. There were over 900,000 bankruptcy filings in the 12-month period ending in June 2008, according to statistics released by the U.S. Bankruptcy Courts. There is no shame in admitting that your debt more than you can afford to pay.

Handling the way you clear your debt in a legal and responsible manner is the best way to move forward. Contact a bankruptcy attorney today to find out about your options.