Chapter 7

• If you are struggling with unsecured debt such as credit card balances, your best option can often be Chapter 7, or a liquidation bankruptcy. This wipes away all of your unsecured debt, although some of your possessions can be seized to pay your creditors. To qualify for Chapter 7 you must pass a means test that demonstrates you cannot pay back your debts.
  
  

Your Home

• You cannot wipe away secured debt such as a mortgage in a Chapter 7 filing. If you are behind on your mortgage, you will still have to make this good if you want to keep your home and avoid foreclosure. If you have significant equity in your home, it may be in danger of being seized and sold to pay off your creditors. This depends on the level of homestead exemption allowed under your state laws.
  
  

Chapter 13

• Chapter 13 is sometimes chosen by people who need to save their homes from foreclosure. Chapter 13 includes a repayment plan as a way for you to pay back at least a portion of your debts. Your mortgage can be included in this repayment plan and if it is approved by the bankruptcy court, your lender cannot then foreclose. To keep your home safe, you must then stick to your repayment plan and get current on your mortgage within a three- to five-year time span.
  
  

Unsecured Debt

• Unsecured debt such as a credit card balance is not automatically wiped away in a Chapter 13 filing the way it is in Chapter 7. At least a portion of it will usually be included in your repayment plan. It is not given as high a priority as secured debts, but you must put some portion of your disposable income toward repaying it. In practice, most people in Chapter 13 do not have to pay back the full amount of their credit card debt.