When you file for personal bankruptcy, you can choose between two options. Provided your income is low enough, you could go for Chapter 7. If you earn too much to pass the means test, or if you prefer, you could opt for Chapter 13 instead.
Chapter 7 can be appealing because you could potentially walk away debt-free. However, it depends on the nature of your debts, as you cannot write all types off. It will also prevent you from filing again for longer and harm your credit score more than a Chapter 13. Yet, while Chapter 7 could leave you debt-free, it might also leave you asset-free, as the bankruptcy trustee will typically sell most of your assets to pay what they can to creditors.
Creditors prefer you pay something rather than nothing
Any creditor you owe will understand that if you have struggled to pay your debts in the past, that is unlikely to change overnight. The worst-case scenario for them would be for you to file for Chapter 7 because they would get nothing or very little.
To entice you to choose Chapter 13, they may be willing to reduce the total amount of debt you owe. Typically you will have to make payments for three of five years to an amount agreed with those you owe. Provided you complete those on time, the court will discharge the remaining debt.
Creditors are not going to offer you ideal terms voluntarily. They still want as much money as they can get from you. Getting help from someone who understands the creditor mindset will be crucial to negotiating a bankruptcy repayment schedule that you can complete.
