People file for bankruptcy to stop collection immediately, wipe out debts they cannot realistically pay, and protect essential property like a home or car from being taken. Federal bankruptcy law delivers all three through a single court filing, and it does so on a predictable timeline: roughly four months for a Chapter 7 discharge, or a three-to-five-year repayment plan under Chapter 13. Whether filing makes sense for you depends on what you owe, what you own, and what you’re trying to save.
Collection Stops the Day You File
The most immediate reason to file is the automatic stay. It’s a federal injunction that takes effect the moment your petition is filed, and every creditor has to stop collecting from you at once. No phone calls. No lawsuits. No wage garnishments, bank levies, foreclosure sales, or vehicle repossessions.1Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay
The stay lasts for the duration of your case unless a specific creditor asks the court to lift it. A mortgage lender might do that if you stop making payments and have no equity in the home, but even when the court grants relief, it applies only to that creditor and that asset. Everything else stays frozen. Creditors who knowingly violate the stay owe you actual damages, court costs, and attorney fees, plus punitive damages in egregious cases.1Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay
Two limits are worth knowing. First, family law matters keep moving. Paternity, child custody, visitation, domestic violence proceedings, and the divorce itself continue, and child support and alimony withholding does not stop. Second, the stay is weaker for repeat filers. If you had a case dismissed in the past year, the stay in the new case expires after 30 days unless the court extends it, and if you had two or more prior dismissals in that year, no automatic stay arises at all.1Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay
Debts Bankruptcy Wipes Out
The core reason to file is the discharge. It’s a court order permanently barring creditors from collecting on qualifying debts. Not paused. Not reduced. Barred, for the rest of your life.
The debts most commonly discharged are credit card balances, medical bills, personal loans, past-due utility bills, and certain court judgments. In Chapter 7, the discharge usually enters about four months after filing.2United States Courts. Discharge in Bankruptcy – Bankruptcy Basics In Chapter 13, it enters after you complete all payments under your plan.3Office of the Law Revision Counsel. 11 USC 1328 – Discharge
One point that catches filers off guard in a good way: debts discharged in bankruptcy are not taxable income. When a creditor forgives debt outside bankruptcy, the IRS treats the forgiven amount as income. Debts wiped out through a Title 11 case are specifically excluded.4Internal Revenue Service. Topic No. 431, Canceled Debt – Is It Taxable or Not? You file Form 982 with your tax return to report the exclusion and owe nothing on the discharged amounts.5Office of the Law Revision Counsel. 26 U.S. Code 108 – Income From Discharge of Indebtedness
Debts That Survive
Bankruptcy is not a universal reset, and if most of what you owe falls into the categories below, filing may not deliver the relief you’re hoping for. Congress excluded specific debts from discharge:
- Child support and alimony survive in every case, without exception.
- Most student loans survive unless you can prove that repaying them would impose an “undue hardship” on you and your dependents, a standard courts have historically read strictly.
- Recent income tax debts survive, including taxes due within the past three years, taxes on returns filed late within two years of the petition, and any taxes you tried to evade.
- Debts obtained through fraud survive, along with luxury purchases over $500 made within 90 days of filing and cash advances over $750 taken within 70 days.
- Criminal restitution and fines survive.
- Debts arising from death or personal injury caused by drunk driving survive.
These exclusions apply under both chapters, though Chapter 13 does discharge a few narrow categories that Chapter 7 doesn’t.6Office of the Law Revision Counsel. 11 U.S. Code 523 – Exceptions to Discharge If your debt profile is heavy on this list, talk to an attorney before filing.
Keeping Your Home, Car, and Other Property
The single biggest misconception about bankruptcy is that you lose everything. You don’t. Exemption laws protect specific categories and dollar amounts of property from being sold. Most Chapter 7 cases are what practitioners call “no-asset” cases, meaning everything the filer owns is exempt and nothing gets sold.
The federal exemptions were last adjusted on April 1, 2025.7Federal Register. Adjustment of Certain Dollar Amounts Applicable to Bankruptcy Cases Current federal limits include:
- Up to $31,575 in equity in your primary residence.
- Up to $5,025 in equity in one motor vehicle.
- A wildcard of $1,675 applicable to any property, plus up to $15,800 of any unused homestead exemption. A renter with no home equity can effectively protect $17,475 in cash, a bank account, or other property.
Exemptions cover equity, not the full value of the item. If your car is worth $12,000 and you owe $9,000 on the loan, the trustee only cares about the $3,000 of equity, which fits well inside the $5,025 vehicle limit.8Office of the Law Revision Counsel. 11 USC 522 – Exemptions
About half of states have opted out of the federal system and require residents to use state exemptions instead. State schemes vary sharply: some offer unlimited homestead protection, others cap it well below federal levels. Which set applies where you live can decide whether you keep your house, so this is one of the first things to check before filing.
Saving a Home or Car in Chapter 13
If you’ve fallen behind on a mortgage or auto loan, Chapter 13 is often the reason to file. The plan spreads your past-due balance over three to five years, and as long as you make current payments plus the plan payments, the lender cannot foreclose or repossess.9Office of the Law Revision Counsel. 11 U.S. Code 1322 – Contents of Plan Chapter 7 does not offer this cure. If saving the house or car is the point of filing, Chapter 13 is usually the chapter that does it.
Which Chapter Fits
Most individuals file under one of two chapters, and they work very differently.
Chapter 7 is a liquidation. A trustee reviews your assets, sells anything not covered by exemptions, and distributes the proceeds. Most cases produce no sale because everything is exempt. The case closes in about four months and qualifying debts are gone. Chapter 7 fits best when you don’t have significant income or non-exempt property and you need a clean slate.
Chapter 13 is a reorganization. You keep your assets and commit your disposable income to a repayment plan running three to five years. Filers with household income below their state’s median get a three-year plan; those above the median commit to five.9Office of the Law Revision Counsel. 11 U.S. Code 1322 – Contents of Plan Chapter 13 fits when you have steady income and either earn too much to qualify for Chapter 7 or need the plan to catch up on a secured debt.
Chapter 7 eligibility runs through the means test. If your income falls below your state’s median for your household size, you pass. If it’s above, a second calculation looks at whether you have enough disposable income after allowable expenses to fund a Chapter 13 plan instead.10Office of the Law Revision Counsel. 11 U.S. Code 707 – Dismissal of a Case or Conversion The income figure isn’t your current paycheck; it’s all income from every source over the six full calendar months before you file, annualized. A few months of overtime or a one-time bonus can push you above the median, which is why timing matters.
What It Costs
The court filing fee is $338 for Chapter 7 and $313 for Chapter 13. If you can’t pay upfront, you can request installment payments, and Chapter 7 filers below certain income thresholds can apply for a full fee waiver.
Attorney fees are the bigger number. A straightforward Chapter 7 typically runs $1,200 to $2,500 nationally, with complex cases higher. Chapter 13 fees are typically $2,500 to $5,000, and many courts set presumptive fee caps that local attorneys follow. Chapter 13 attorney fees can often be rolled into the repayment plan, reducing the upfront cost.
Filing without an attorney is legally allowed, but bankruptcy paperwork is unforgiving. Errors in your schedules can cost you property you could have kept, or in serious cases, cost you the discharge itself. Pro se filings are disproportionately represented among cases that go badly.
Credit, Rebuilding, and How Often You Can File
A bankruptcy stays on your credit report for up to ten years from the filing date.11Consumer Financial Protection Bureau. How Long Does a Bankruptcy Appear on Credit Reports? Your score will drop in the short term. The discharge doesn’t erase the record of the filing; it prevents creditors from collecting the discharged debts, permanently.
Most people who reach the point of filing already have severely damaged credit from missed payments, collections, and judgments. Eliminating the underlying debts, and the resulting change in your debt-to-income ratio, usually puts you in a better position to rebuild than you were before filing. Secured credit cards, credit-builder loans, and consistent on-time payments are the standard tools. Meaningful credit improvement within two to three years of discharge is common, even though the bankruptcy notation itself remains visible longer.
Bankruptcy relief isn’t unlimited. If you’ve received a discharge before, federal law imposes waiting periods measured from the filing date of the prior case before you’re eligible for another:
- Chapter 7 after Chapter 7: eight years.
- Chapter 7 after Chapter 13: six years, unless the prior Chapter 13 paid creditors in full or paid at least 70% in good faith.
- Chapter 13 after Chapter 7: four years.
- Chapter 13 after Chapter 13: two years.
These periods govern eligibility for a discharge, not the right to file. You can file inside a waiting period, but you won’t receive a discharge, which limits the value of the filing to whatever temporary protection the automatic stay provides.12Office of the Law Revision Counsel. 11 U.S. Code 727 – Discharge Combined with the reduced stay protection for repeat filers, this makes strategic timing of a single, well-prepared case far more valuable than repeated attempts.