Filing any type of bankruptcy is best avoided if at all possible, but if you find yourself in a bad situation where bankruptcy is the only option, then you may have no choice. The next consideration you have to make is which type of bankruptcy to file. There are good and bad points to filing both Chapter 7 and Chapter 13, but you may find filing Chapter 13 is better in the long run.
The first thing to know is that Chapter 7 wipes out your debts whereas Chapter 13 is a repayment plan. The American Bar Association notes that this difference actually is huge when it comes to deciding which type of bankruptcy to file because it affects many of the details of the bankruptcy.
One of the biggest reasons to consider filing Chapter 13 instead of Chapter 7 is that creditors often look more favorably on Chapter 13. This is because you have paid off some past debts and took control of your finances with help instead of simply having the court take control for you. Plus, some creditors do not report a Chapter 13 bankruptcy for as long as they report a Chapter 7.
In addition, you often can save important assets through Chapter 13. This includes your home and your vehicle. Both of which could be lost when filing Chapter 7 unless you own them outright without a lien. You also may save other non-exempt assets, which are usually all taken in a Chapter 7. This information is for education and is not legal advice.