Personal bankruptcy is not a one-size-fits-all solution. Careful consideration must be given to your unique circumstances and your ultimate objectives. The most important decision to make is choosing the right chapter under which to file – Chapter 7 or Chapter 13. In either case, bankruptcy is about fairness. If you don’t make enough and don’t have a lot of equity in your home, a vehicle, or other personal property, you can eliminate credit card balances, medical bills or personal loans with a Chapter 7 filing. On the other hand, if you have a lot of equity in your home, or your household income is above “median income” for a household of similar size, the bankruptcy code presumes that you can pay at least some of your debt, and a repayment plan under chapter 13 is likely the better choice. There are other reasons to choose chapter 13 over a chapter 7.
When choosing between a chapter 7 and a chapter 13, you will have to consider whether or not:
You have equity in any personal or real property that you want to keep.
You can afford to pay back some, all, or none of your personal debts.
You can afford the payments on car or mortgage loans, and installment agreements.
You can pay your tax debts, student loans, or divorce-related obligations outside of bankruptcy.