Chapter 7 and Chapter 13

• In Chapter 7 bankruptcy, a court-appointed trustee will take your assets and money--although your state law may protect some of your property--and sell them to pay your creditors. In Chapter 13, you keep your property but spend three or five years paying your creditors with your disposable income. After the payment plan or the asset sale, the court will discharge your remaining debts, except for those that survive bankruptcy, such as back taxes, child support and student loans.
  
  

Money Limitations

• In Chapter 13, the question isn't how small your debts are but how large. Bankruptcy law limits how much debt you can have when you file; in 2011, for example, the maximum is roughly $1.02 million in debts secured by collateral--like mortgages and car loans--and $360,000 for unsecured debts such as credit cards.
  
  In Chapter 7, the limit is income: Either your average income for the six months before you file must be less than your state's median or you must pass a means test comparing your income to your living expenses. If you can't pass either test, you don't qualify.
  
  

Other Restrictions

• You can't file bankruptcy unless you complete a federally approved credit-counseling course in the six months before you file. If a bankruptcy court has rejected a previous bankruptcy petition, you have to wait 180 days before you can file again; if you completed a previous bankruptcy, the wait to refile will be at least two years. You also need enough money to pay your bankruptcy filing fees, which can add up to almost $300.
  
  

Considerations

• While there's no legal minimum debt in bankruptcy, the relationship between your debts and your income is important. If you can afford to pay your current debts, the court may decide you're dealing in bad faith and reject your petition. Another consideration is that bankruptcy costs you money and time: If your debts are under $300, for example, your fees will probably cost more than you'd save. If you're filing Chapter 7, you can ask for a fee waiver if your income is less than 150 percent of the federal poverty level.