How to Declare Personal Bankruptcy: Chapters, Filing, and Discharge

To declare personal bankruptcy, you file a petition in federal bankruptcy court under either Chapter 7 or Chapter 13, after completing a required credit counseling session and assembling detailed schedules of your debts, assets, income, and expenses. The filing fee is $338 for Chapter 7 and $313 for Chapter 13, most people also pay an attorney between $1,000 and $2,500 for a straightforward case, and the case runs about three to four months for Chapter 7 or three to five years for Chapter 13. Here is what the process actually looks like, step by step.

Step 1: Choose Between Chapter 7 and Chapter 13

The first decision shapes everything else. Chapter 7 is a liquidation: a court-appointed trustee reviews your assets, sells anything not protected by an exemption, pays creditors from the proceeds, and the remaining qualifying debt is wiped out. Most Chapter 7 cases are “no-asset” cases because the filer doesn’t own anything valuable enough beyond their exemptions to sell. From filing to discharge takes about three to four months.1United States Courts. Chapter 7 – Bankruptcy Basics

Chapter 13 keeps your property in exchange for a three- to five-year repayment plan. You send monthly payments to a trustee, who distributes them to creditors, and whatever qualifying debt remains at the end of the plan is discharged. The main reason to choose Chapter 13 is protecting something specific: a home in foreclosure, a car you’re behind on, or non-exempt assets you’d lose in Chapter 7. You have to stay current on the plan payments for the whole term.2United States Courts. Chapter 13 – Bankruptcy Basics

Chapter 13 has debt limits. After a temporary expansion expired in mid-2024, eligibility reverted to separate caps for secured and unsecured debt. These amounts adjust periodically, so confirm the current thresholds with the court or an attorney before assuming you qualify.

Step 2: Confirm You’re Eligible

Chapter 7 isn’t open to everyone. You have to pass a means test that compares your household income over the prior six months to the median income for your state and household size. Below the median, you pass. Above it, the second part of the test subtracts allowed expenses from your income to calculate monthly disposable income; if what’s left isn’t enough to make meaningful payments to creditors, you still qualify. If it is, you’ll likely need Chapter 13 instead. The U.S. Trustee Program publishes the current median income figures and expense allowances, and the numbers change regularly.3U.S. Department of Justice. Means Testing

You also can’t file back-to-back cases without waiting. After a Chapter 7 discharge, you must wait eight years to file another Chapter 7 and four years to file a Chapter 13. After a Chapter 13 discharge, the wait is two years for another Chapter 13 and six years for a Chapter 7, unless you paid unsecured creditors in full or at least 70 percent under a good-faith plan.4United States Courts. Discharge in Bankruptcy – Bankruptcy Basics

Step 3: Complete Pre-Filing Credit Counseling

Federal law requires you to finish a credit counseling session from a government-approved agency in the 180 days before you file. The session reviews your finances and confirms bankruptcy is the right choice rather than a debt management plan or another alternative.5United States Bankruptcy Court District of Columbia. Notice to All Debtors About Prepetition Credit Counseling Requirement

You can take it online, by phone, or in person. Most agencies charge $50 or less, and they must offer the service for free or at a reduced rate if you can’t afford it. At the end you receive a certificate that you’ll file with your petition. Without it, the court will dismiss your case. Only agencies approved by the U.S. Trustee Program can issue valid certificates; a searchable list by state is on the U.S. Trustee’s website.6U.S. Department of Justice. Frequently Asked Questions (FAQs) – Credit Counseling7United States Courts. Credit Counseling and Debtor Education Courses

Step 4: Gather Documents and Fill Out the Forms

This is where most of the real work happens. You need a full picture of your financial life: every creditor you owe (with account numbers and balances), every asset you own (from real estate down to household goods), your income from all sources, and your monthly expenses.

Supporting documents you’ll need to pull together:

  • Federal tax returns from the past two years, and state returns if you filed them.
  • Pay stubs covering at least the 60 days before filing; many trustees prefer six to seven months of records.
  • Recent bank and investment account statements.
  • Mortgage and loan statements for any secured debts.
  • Vehicle titles and property deeds for major assets.

All of this feeds into the official forms. The core document is the Voluntary Petition (Form 101), followed by a set of schedules:

  • Schedule A/B lists all property you own or have an interest in.
  • Schedule D lists creditors with secured claims, like your mortgage lender or auto lender.
  • Schedule E/F lists unsecured creditors, such as credit card companies and medical providers.
  • Schedule I reports your current income from all sources.
  • Schedule J reports your monthly living expenses.

Accuracy matters. Leaving a creditor off can prevent that debt from being discharged, and undervaluing assets can create legal problems with the trustee. Errors in the schedules are the most common reason cases get complicated, which is why most filers hire an attorney at this stage.8United States Courts. Bankruptcy Forms

Step 5: Know What You Get to Keep

Exemption laws protect many essential assets from liquidation. The federal exemption system, adjusted most recently in April 2025, sets these limits in a Chapter 7 case:9Federal Register. Adjustment of Certain Dollar Amounts Applicable to Bankruptcy Cases

  • Up to $31,575 in equity in your primary residence (homestead).
  • Up to $5,025 in equity in one vehicle.
  • Up to $1,675 in any property of your choosing (the wildcard), plus up to $15,850 of any unused portion of the homestead exemption, applied to any asset.10Office of the Law Revision Counsel. 11 USC 522 – Exemptions

Roughly two-thirds of states have opted out of the federal system and require you to use state-specific exemptions instead. The rest, plus the District of Columbia, let you choose between federal and state. State exemptions vary widely. Some offer an unlimited homestead exemption, protecting all of your home equity regardless of value; others are far more restrictive. Which set applies depends on where you live, and picking the wrong set can cost you property you didn’t have to lose.

In Chapter 13, exemptions matter less because you keep your property. The value of your non-exempt assets still affects how much you must pay through the plan, since unsecured creditors are entitled to receive at least what they would have gotten in a Chapter 7 liquidation.

Step 6: File the Petition

Once the forms are complete and the counseling certificate is in hand, you file everything with the federal bankruptcy court. File in the judicial district where you’ve lived for the greater part of the last 180 days. If you recently moved, that may still be your previous district.

An attorney files electronically through the court’s system. Filing without a lawyer usually means delivering physical paperwork to the clerk’s office. The fee is $338 for Chapter 7 and $313 for Chapter 13. If you can’t pay all at once, you can apply to pay in installments over 120 days (extendable to 180). Chapter 7 filers whose household income is below 150 percent of the federal poverty guidelines can apply for a complete fee waiver.11Cornell Law Institute. Federal Rules of Bankruptcy Procedure Rule 1006

The Automatic Stay Starts Immediately

The moment your petition is filed, the court issues an automatic stay that halts most collection activity. Creditors must stop calling, lawsuits pause, wage garnishments stop, and foreclosures freeze. It is one of the fastest and most powerful protections bankruptcy provides.12Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay

The stay doesn’t cover everything. Criminal proceedings continue. Family law matters like custody, divorce, and paternity move forward normally. Collection of domestic support obligations, including child support and alimony, is not stopped by the stay, so a wage garnishment for child support keeps going after you file.

If you had a previous bankruptcy case dismissed in the past year, the stay in your new case lasts only 30 days unless the court extends it. Two prior dismissals within the year means no automatic stay at all without a court order.

Step 7: Attend the 341 Meeting of Creditors

About 20 to 40 days after filing, you attend a meeting of creditors, called a 341 meeting after the Bankruptcy Code section that requires it. Despite the name, creditors rarely show up. The trustee assigned to your case runs it, and it usually lasts about 10 minutes.

You answer questions under oath about your finances and the accuracy of your petition. The trustee verifies your identity, confirms your income and assets match your schedules, and asks whether you understand what filing means. No judge is present. But this is sworn testimony. Lying at a 341 meeting can get your case dismissed and expose you to criminal penalties.

Step 8: Finish the Debtor Education Course

Before your debts can be discharged, you have to complete a second course, called a debtor education or personal financial management course. It’s separate from the pre-filing counseling and focuses on budgeting, managing credit, and rebuilding after bankruptcy.

The certificate has to be filed with the court within 60 days after the first date set for the 341 meeting. Miss this and the court will close your case without a discharge, which defeats the entire point. The course must come from an approved provider and is available online, by phone, or in person.7United States Courts. Credit Counseling and Debtor Education Courses

Debts That Don’t Go Away

Not everything gets wiped out. Certain categories survive even a successful discharge, and these catch many filers off guard:13Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge

  • Child support and alimony cannot be discharged under any circumstances.
  • Most recent income taxes survive; older tax debts may be dischargeable if the return was due more than three years ago, was filed more than two years ago, and the tax was assessed more than 240 days before filing. Debts involving fraud or willful evasion are never dischargeable.
  • Federal and private student loans survive unless you file a separate lawsuit called an adversary proceeding and prove undue hardship. Updated federal guidance has made this somewhat more accessible, but it still requires a court determination.
  • Money obtained through false pretenses, misrepresentation, or actual fraud is not dischargeable.
  • Debts from willful injury to a person or property survive.
  • Debts from death or personal injury caused by drunk driving are not dischargeable.
  • Criminal fines, penalties, and restitution generally survive.
  • Debts owed to a creditor you left off your schedules may not be discharged if that creditor didn’t otherwise learn about the case in time.

Recent purchases can also cause trouble. Large charges for luxury goods shortly before filing, or sizable cash advances in the weeks before filing, are presumed non-dischargeable. Running up credit cards right before you file is one of the fastest ways to invite a fraud objection from creditors.

What Happens to Your Credit Afterward

A bankruptcy filing stays on your credit report for up to 10 years from the date the court enters the order for relief.14Consumer Financial Protection Bureau. How Long Does a Bankruptcy Appear on Credit Reports? That maximum applies to both Chapter 7 and Chapter 13. The impact on your score is most severe in the first two to three years and fades as you rebuild payment history.

Bankruptcy won’t shut you out of credit forever. Secured credit cards, credit-builder loans, and small installment loans become available relatively quickly after discharge, and consistent on-time payments matter more than anything else going forward. Many people see meaningful score improvement within 18 to 24 months of discharge, though a full rebuild takes longer. Getting a mortgage involves mandatory waiting periods that vary by loan type; an FHA loan generally requires a two-year wait after a Chapter 7 discharge, while conventional loans typically require four.

For someone genuinely buried in debt they cannot repay, the long-term credit hit from bankruptcy is often less damaging than years of missed payments, collections, and lawsuits without it. It’s a real tool with real costs, and for the right situation it works.