For most citizens the thought of going bankrupt is a scary and unknown area that conjures up thoughts of having all your possessions seized by the courts and liquidated to appease the creditors waiting in the wings with gleefully maniacal smiles and hands rubbing together in anticipation. The flip side is the people who believe that by declaring bankruptcy you are able to simply laugh as you walk away from your debts much to the chagrin of those same creditors. The truth is somewhere in the middle and depends quite a bit on the type of bankruptcy protection you seek.
There are basically 2 types of bankruptcy protection you can seek, Chapter 13 and Chapter 7. Both affect your personal finances in different ways. If you are drowning in credit card and health care debt and have very little in the way of assets like cars, houses or other big ticket items you would like to protect, then the best choice would most likely be to file for Chapter 7. By filing for this type of protection your debts are essentially wiped out and you are free to resume your life without the constant stress of creditors harassing you.
Since you no longer have to make payments on those debts, your cash flow should increase and life may get easier despite the fact you credit rating will take a huge hit. The other option, especially if you have assets you would like to keep such as houses or cars, is to file Chapter 13. Basically in Chapter 13 you do not walk away from the debts but rather have the courts set up a payment plan with the creditors over a period of time that will allow you to repay your debts without the penalties and accruing interest making it impossible to get caught up or ahead.
As long as you make your court approved payments you do not lose your assets. While you may not have the cash flow you would if you sought Chapter 7 and had the debts erased, you will still own the big assets at the end. The best idea is to seek the advice of a bankruptcy attorney or trustee to get a good understanding of exactly where you stand prior to making any decisions.