The two basic consumer options for bankruptcy are Chapter 13 and Chapter 7. Both can work excellently in specific situations. Deciding which one you should use is not a matter of deciding which is better overall, but which will work better for your needs. That’s why you need to know as much as you can about how they differ and how they’re similar.
Liquidation vs. repayment
The easiest way to consider Chapter 7 is by thinking about it as liquidation bankruptcy. You have many exempt assets, but those that are not exempt must be sold off and the money used to repay your creditors. When this has been done, the debt that remains is forgiven and so you are no longer in debt. This process erases it.
Chapter 13, on the other hand, does not erase most of your debt at all. Instead, it combines that debt into a repayment plan. You work with a third party to pay back your creditors one monthly payment at a time. This is often called “wage-earner’s bankruptcy” because you need to make a wage that supports those repayments in order for it to work. If you have no income, Chapter 7 is likely a better option.
What should you use?
To decide which one you should use, just consider your goals. If you have a significant amount of income and assets that you want to keep, Chapter 13 likely makes more sense. It may also be the only one your qualify for. If you don’t have any income and you’re not worried about losing assets, Chapter 7 makes more sense. It can give you the fresh start that you have been looking for.
Either way, the key is to learn as much about the process as you can before making your decision. It can definitely help to work with an experienced law firm so that someone who has seen this process play out many times can guide you forward.