If you are at the point of filing bankruptcy then I would think you had already considered a possible debt consolidation or other means of getting caught up...so at that point, it becomes a decision on whether you can discharge the entire debt load or only portions.

A chapter 7 is a complete discharge - you have to meet minimum guidelines for debt and income...if you do not qualify, they will automatically switch you to a chapter 13. The lawyers do this but they explain it to you as they are doing it. A chapter 13 is basically a restructure plan where you will be put on a 3 year program usually to funnel all monies for the debt through the court system.

If you make money, and have property the courts may require that you file for chapter 13. If you are borderline...and being given an option - file chapter 7. Bankruptcy will take you 2 years to get over the worst part of the credit hit...however, a chapter 13 takes 3 years to pay off and you still take a 2 year hit minimum. So, instead of 2 years and then slow recovery...it would be 5 years and similarly slow recovery.

Better to bite the bullet, take the credit hit now - and move on with your life. If you have not done money management - or if you had extenuating circumstances that brought this about - us it to modify your spending behavior so you can eliminate any future debts from occuring. That would be my advice - and believe me...I have been there - I fight debt every step of the way now.

Chapter 13 allows persons with a steady income to keep property, like a mortgaged house or a car, that they otherwise might lose. In Chapter 13, the court approves a repayment plan that allows you to use your future income to pay off a default during a three-to-five-year period, rather than surrender any property. After you have made all payments under the plan, you receive a discharge of your debts.

Known as straight bankruptcy, Chapter 7 involves liquidation of all assets that are not exempt. Exempt property may include automobiles, work-related tools and basic household furnishings. Some of your property may be sold by a court-appointed official a trustee or turned over to your creditors. You can receive a discharge of your debts through Chapter 7 only once every six years.

Before filing for either consider consolidating your debts into one lump sum. There are some financial institutions that will even let you consolidate your debts if you have less than $10,000.00. One such institution is CareOne.

When you file a Chapter 13 bankruptcy, you still have debts, but it is set up so that you only have to pay a portion of what is owed. This allows you to get a fresh start over time. If you own property, your home can still be taken away if it was put up for collateral.

Chapter 7 is total bankruptcy and all debts are discharged. However, the same is true for real property as stated above. This means that all of your assets are liquidated to pay back the creditors.

There are some debts that can't be discharged at all, whether it's Chapter 7 or Chapter 13, and those include child support, alimony, some taxes, criminal fines, and debts arising from DUI.

Remember if you file for either Chapter 7 or 13, your credit will not be restored for more than 7 years. On the other hand, if you consolidate your debts, you could be debt free and have a good credit standing within 5 years.

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The bankruptcy laws are means tested, so you may not be able to choose whether you file for a chapter 7 or a chapter 13 because it very much depends on your circumstances. Assets outside of your personal allowance will be liquidated by the trustee,the assets you are allowed to keep vary between state, so you must see what the state will allow you to keep up to certain values of the items.

Chapter 13 is good to use if you own things like your house or your car. What it will do is put you on a payment plan to repay all of your debt and you still get to keep your valuables. Also, it will remain on your credit report less time than if you file Chapter 7. However Chapter 7 is good if you do not have any valuables and you truly do not have any way to pay back your debts. It will wipe your slate clean excluding debts from child support, the IRS and student loans. However, it will remain on your credit report for up to ten years or more.