The U.S. Bankruptcy Code, codified as Title 11 of the United States Code, is the federal law that gives people and businesses buried in debt two basic options: wipe out qualifying debts by surrendering non-exempt property, or keep the property and repay creditors over three to five years under a court-supervised plan.1Office of the Law Revision Counsel. Title 11 United States Code – Bankruptcy Every case runs through federal court, where a judge oversees the case and a trustee manages the debtor’s finances. Which chapter you file under decides almost everything else.
Which Chapter Fits Your Situation
The Code is organized by chapter, and each chapter is built for a different kind of debtor.
Chapter 7: Liquidation
Chapter 7 is what most people mean when they say “bankruptcy.” A court-appointed trustee gathers whatever property you own beyond your exemptions, sells it, and pays creditors from the proceeds. In return, most unsecured debts, such as credit card balances and medical bills, are eliminated.2United States Courts. Chapter 7 – Bankruptcy Basics The case usually wraps up in four to six months. Most Chapter 7 cases are “no-asset” cases, meaning the debtor owns nothing valuable enough beyond exemptions for the trustee to bother selling.
Chapter 13: Repayment Plan
If you have steady income and want to keep your home or car, Chapter 13 is usually the better fit. Instead of surrendering property, you propose a repayment plan that runs three to five years. If your household income is below your state’s median, the plan lasts up to three years; if it’s above, the plan stretches to five.3Office of the Law Revision Counsel. 11 USC 1322 – Contents of Plan The plan lets you catch up on missed mortgage payments and restructure car loans, and a co-signer stay protects anyone who guaranteed your consumer debts during the case.
Chapter 11: Business Reorganization
Businesses that want to keep operating while they restructure file under Chapter 11. The debtor usually stays in charge as a “debtor in possession” and negotiates a reorganization plan with different classes of creditors.4Office of the Law Revision Counsel. 11 USC 1101 – Definitions for This Chapter Individuals whose debts exceed the Chapter 13 caps can also use Chapter 11, though it’s more expensive and complex.
Chapter 12 and Chapter 15
Chapter 12 offers streamlined relief for family farmers and fishermen with regular annual income, along the lines of Chapter 13 but adapted for agricultural economics. Chapter 15 handles cross-border insolvency, letting U.S. courts cooperate with foreign courts when a debtor has assets or creditors in multiple countries.5Office of the Law Revision Counsel. 11 US Code 1501 – Purpose and Scope of Application
Who Qualifies to File
Eligibility rules live in 11 U.S.C. § 109. The baseline is simple: you need to live in, do business in, or own property in the United States.6Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor Each chapter then adds its own filter.
The Means Test for Chapter 7
Chapter 7 uses a means test to keep out people who could actually afford to repay part of what they owe. If your household income is below your state’s median for a family your size, you pass. If it’s above, the court runs a formula that subtracts allowed expenses from your income. When the remainder is high enough to fund a meaningful repayment, the filing is presumed abusive and you’ll usually be pushed toward Chapter 13.2United States Courts. Chapter 7 – Bankruptcy Basics The U.S. Trustee Program publishes the income data and expense allowances the calculation depends on.7United States Department of Justice. Means Testing
Chapter 13 Debt Limits
Chapter 13 caps how much debt you can carry into the case. For cases filed in 2026, unsecured debts must be under $526,700 and secured debts under $1,580,125.8United States Courts. Chapter 13 – Bankruptcy Basics The ceilings adjust periodically for inflation. If your debts exceed them, Chapter 11 is the alternative.
Who Cannot File
Banks, insurance companies, credit unions, and similar regulated financial institutions cannot file under Chapter 7. They have separate insolvency frameworks under other federal and state law. Railroads are also excluded from Chapter 7 but may file under Chapter 11.6Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor
What You Do to File
Credit Counseling
Before filing, you must complete a credit counseling session with a nonprofit agency approved by the U.S. Trustee Program. It has to happen within 180 days before you file the petition.9Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor – Section: Subsection (h) It can be done by phone or online and covers your options, including whether bankruptcy is actually your best move. Skip it and your case gets dismissed.
Documentation
The paperwork is heavy. You need a complete list of every creditor you owe, with addresses and exact balances. You need a detailed schedule of everything you own, from real estate and vehicles to retirement accounts and household items. On top of that, the court requires a breakdown of your monthly income, your regular expenses, and a statement of financial affairs covering recent transactions, closed accounts, and any property transfers.10Office of the Law Revision Counsel. 11 US Code 521 – Debtor’s Duties Everything goes on standardized forms available through the U.S. Courts website. Accuracy matters. Leaving out assets or income invites fraud allegations that can sink the whole case.
Filing Fees
A Chapter 7 case costs $338 to file, a Chapter 13 case costs $313, and Chapter 11 is considerably more. Chapter 7 filers whose income is below 150 percent of the federal poverty guidelines can ask for a fee waiver. Everyone else can request to pay in installments. Attorney fees for consumer cases typically run from a few hundred to several thousand dollars depending on complexity and location.
What Happens the Moment You File
The second the petition hits the court’s docket, the automatic stay takes effect. Almost all collection activity against you stops: lawsuits, foreclosures, repossessions, wage garnishments, and collection calls all halt.11Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay Creditors don’t have to receive formal notice for the stay to apply; it kicks in by operation of law.
The stay has limits. Criminal proceedings against you continue. Family law matters like establishing paternity, modifying child support or alimony, and domestic violence proceedings also move forward, and domestic support can still be collected from property that isn’t part of the bankruptcy estate.
Repeat filers get weaker protection. If you had a case dismissed within the past year and file again, the stay expires after 30 days unless the court extends it on a showing of good faith. File a third time within a year of two prior dismissals and the stay doesn’t activate at all unless you ask the court to impose it.
Creditors who violate the stay pay for it. Anyone injured by a willful violation can recover actual damages, court costs, and attorney fees, plus punitive damages in egregious cases. A collection call placed after the creditor knows about the filing is a federal violation, not just bad manners.
Creditors can also ask the court to lift the stay against specific property. The usual grounds are that the debtor has no equity in the property and it isn’t necessary for reorganization, or that the creditor’s interest isn’t being adequately protected. In Chapter 13, a mortgage lender often seeks relief when the debtor falls behind on plan payments.
What You Get to Keep: Exemptions
Filing doesn’t mean losing everything. Exemption laws shield certain property from the trustee. The federal bankruptcy exemptions, adjusted for cases filed between April 1, 2025, and March 31, 2028, cover:
- Homestead: up to $31,575 in equity in your primary residence.
- Motor vehicle: up to $5,025 in one vehicle.
- Household goods: up to $800 per item, with an aggregate cap of $16,850 for furniture, appliances, clothing, and similar personal property.
- Wildcard: $1,675, plus up to $15,800 of any unused homestead exemption, applied to any property you choose.
These figures come from the Federal Register.12Federal Register. Adjustment of Certain Dollar Amounts Applicable to Bankruptcy Cases Married couples filing jointly can double them.
Here’s the catch. The Code lets each state opt out of the federal list and force its residents onto the state’s own exemptions instead, and most states have done exactly that.13Office of the Law Revision Counsel. 11 US Code 522 – Exemptions State exemptions vary widely. Some offer unlimited homestead protection; others cap it well below the federal amount. Where your state gives you the choice, comparing the two lists carefully is one of the most consequential decisions in the case. You pick one system or the other. No mixing.
What Comes Out at the End: The Discharge
The discharge is the point of the whole exercise. It’s a permanent court order eliminating your personal liability for qualifying debts, and once issued it bars creditors from ever trying to collect those obligations again, by lawsuit, phone call, or letter.14Office of the Law Revision Counsel. 11 USC 524 – Effect of Discharge In Chapter 7 it usually arrives about four months after filing. In Chapter 13 you get it after completing all plan payments, which takes three to five years.
Debts That Survive
Some debts are carved out of the discharge entirely under 11 U.S.C. § 523:
- Domestic support obligations. Child support and alimony survive no matter what.
- Recent income taxes, taxes on unfiled returns, and taxes involving fraud.
- Debts obtained through false pretenses, false financial statements, or actual fraud.
- Debts arising from willful and malicious injury to another person or their property.
- Student loans, dischargeable only if the debtor proves “undue hardship” in a separate court proceeding.
- Criminal fines and restitution owed to government entities.
Student loans trip people up. Unlike the other nondischargeable debts, they require an adversary proceeding, which is essentially a separate lawsuit inside the bankruptcy case, and the debtor has to show that repayment would impose undue hardship. Courts have historically read that standard narrowly. Fewer than one percent of borrowers who file bankruptcy even attempt the proceeding.
Reaffirmation Agreements
Sometimes a debtor wants a specific debt to survive discharge, usually to keep a car. A reaffirmation agreement makes that happen voluntarily. To be valid, it has to be signed before the discharge is entered, the debtor has to receive specific disclosures, and it has to be filed with the court. If the debtor has no attorney, the judge must approve it after finding it doesn’t impose an undue hardship. Reaffirmation is optional, and signing one carelessly can undo much of the benefit of filing.
When Discharge Is Denied
The court can refuse a Chapter 7 discharge outright if the debtor acted dishonestly. Grounds include hiding or destroying assets within a year before filing, making a false oath in the case, failing to explain a loss of assets, concealing financial records, or refusing to obey a court order.16Office of the Law Revision Counsel. 11 USC 727 – Discharge A debtor who already received a Chapter 7 discharge in a case filed within the prior eight years is also ineligible. Separately, failing to complete the required financial management course before the case closes blocks the discharge.
How Long Until You Can File Again
Relief isn’t unlimited. After a Chapter 7 discharge, you have to wait eight years from the original filing date for another Chapter 7 discharge, or four years for a Chapter 13 discharge. After a Chapter 13 discharge, the wait is two years for another Chapter 13 or six years for a Chapter 7. The six-year bar after Chapter 13 can be shortened if the debtor paid unsecured creditors in full or paid at least 70 percent of unsecured claims under the prior plan.
A case dismissed without a discharge generally doesn’t trigger these waiting periods, though a court can bar refiling for 180 days when the dismissal resulted from the debtor ignoring court orders or failing to appear.
What It Does to Your Credit
A Chapter 7 bankruptcy stays on your credit report for up to ten years from the filing date. A Chapter 13 case typically stays for seven. During that window, new credit, apartment rentals, and some background checks get harder. The effect fades over time, especially if you rebuild credit deliberately after discharge. Many people see meaningful score improvement within two to three years of finishing the process.