There are two different ways to file for bankruptcy: chapter 7 and chapter 13. Each has their own benefits and drawbacks.
The main difference between chapter 7 and chapter 13 is how much money you owe. With chapter 7 bankruptcy, you only repay what you can afford. On the other hand, with chapter 13 bankruptcy, you make monthly payments to your creditors over three to five years.
The biggest benefit of chapter 13 bankruptcy is that it allows you to keep some of your property. When you file for chapter 7 bankruptcy, everything you own becomes part of the bankruptcy estate. This includes your home, cars, jewelry, clothing, furniture, and even your retirement savings.
With chapter 13 bankruptcy, however, you retain ownership of these items. If you want to sell or give away your belongings, you may be able to do so after you complete your repayment plan and your debts have been discharged by the court.
Chapter 13 bankruptcy does not allow you to avoid paying taxes. You still end up having to pay federal, state, and local taxes. However, if you file for chapter 7, you may be able get a refund from the IRS.