If you want to file for bankruptcy, you will have two options. You can file Chapter 7 or Chapter 13. A Chapter 7 bankruptcy wipes out your debt. The court liquidates your non-exempt assets and uses those funds to repay your debts. The court then discharges any debts that remain unpaid. In a Chapter 13 bankruptcy, you create a repayment plan to pay back all or part of your debts. There are advantages to filing a Chapter 13 bankruptcy that you might want to consider before making your decision.
The U.S. Courts explains that a Chapter 13 bankruptcy allows you to protect your co-signers on any loans or debts so that your creditors cannot try to go after a co-signer to repay the debt. You also do not have to interact with your creditors once you file because the trustee in your case will manage the distribution of payments.
This type of bankruptcy allows you to extend payments for debts over the repayment period of your plan. This can lower monthly payments and make them more affordable. Under Chapter 13, you also have the chance to avoid foreclosure and save your home. Once you file, it stops all foreclosure actions and gives you the change to clear up late payments over the course of the repayment plan.
Do keep in mind that Chapter 13 is a repayment plan, so you do have to make regular payments to repay your debts. In addition to the repayment plan, if you want to save your home, you will also need to make your regular mortgage payment.