Consumer Bankruptcy:

Choosing Chapter 7 or Chapter 13

If you are eligible for both Chapter 7 and Chapter 13 bankruptcy, then it is up to you to determine which is the best option to suit your needs. A bankruptcy attorney can help you choose the best option. However, you should be aware that you may not actually have a choice.
Make sure that you know the Chapter 7 requirements under the new bankruptcy law. For example, if your average monthly income over the 6 months preceding when you filed is greater than the median monthly income for a family your size in your state, then you cannot file for Chapter 7. Furthermore, you need to take the “means test,” to see if your disposable income puts you in a position to file for Chapter 13, which involves repayment of some debts. For more on this, see out sections on eligibility for Chapter 7 or Chapter 13.

That said, Chapter 7 is the more popular choice among those who are eligible for it, because it does not require the repayment of any debts, while Chapter 13 does. However, in some cases Chapter 13 really is better. It is a much more effective way of dealing with mortgages, if you are behind, because that amount can be included in the repayment plan. You would be more likely to lose the house in Chapter 7.