Bankruptcy Law Questions? Ask a Bankruptcy Lawyer Now.
Which chapter really depends on what you want to do. With a Chapter 13, you get to keep all of your stuff, but you don't have to pay the full amount of the debt owed. Instead, you pay the lender back the current value for all property.
For instance, if you owe $500000 on your house and now it's worth $250000, you'd have to pay back the $250000.
Chapter 13 plans are usually set for 5 years to pay off most debts (mortgages are the usual exception.
Chapter 7 is a complete liquidation of all debts except those you may want to keep - like your house or car payments. All other debts are discharged/wiped away.
Both filings effect you bankruptcy, but Chapter 13 looks better because you just didn't walk away - you paid the lenders a reduced sum.
My suggestion is to meet with a bankruptcy attorney, look at your financials and then decide.