How to Declare Personal Bankruptcy: Chapter 7 vs. 13 and Filing Steps

To declare personal bankruptcy, you pick between Chapter 7 and Chapter 13, take a court-approved credit counseling course, fill out a petition and financial schedules, file them with the federal bankruptcy court in your district, attend a short meeting with a trustee, complete a second financial management course, and wait for the discharge order that wipes out qualifying debts. Chapter 7 costs $338 to file and finishes in about three to four months; Chapter 13 costs $313 and runs three to five years through a repayment plan. Attorney fees for a straightforward case commonly run $1,000 to $2,500, and the filing stays on your credit report for up to 10 years.

Choose Between Chapter 7 and Chapter 13

Chapter 7 is liquidation. A court-appointed trustee reviews what you own, sells any assets that aren’t protected by an exemption, and pays creditors from the proceeds. Whatever qualifying debt is left gets discharged. Most Chapter 7 cases are “no-asset” cases, meaning the filer owns nothing worth selling beyond their exemptions. Start to finish, it takes about three to four months.1United States Courts. Chapter 7 – Bankruptcy Basics

Chapter 13 keeps your property in exchange for a repayment plan lasting three to five years. You make monthly payments to a trustee, who distributes the money to creditors. Anything left of qualifying debt at the end of the plan gets discharged. The main reason to choose Chapter 13 is protection: you can keep a home in foreclosure or a car you’re behind on, as long as you stay current on plan payments.2United States Courts. Chapter 13 – Bankruptcy Basics

Chapter 13 has separate debt caps for secured and unsecured debt, and the amounts are adjusted periodically. Check the current thresholds with the court or an attorney before assuming you qualify.

Confirm You Qualify for Chapter 7 (the Means Test)

Chapter 7 isn’t open to everyone. The means test compares your household income over the prior six months to the median income for your state and household size. Below the median, you pass and can file.3U.S. Department of Justice. Means Testing

Above the median, 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, Chapter 13 is likely your only option. The U.S. Trustee Program publishes current median income figures and expense allowances on its website, and those numbers change regularly.

Take the Pre-Filing Credit Counseling Course

Federal law requires every filer to complete a credit counseling session from a government-approved agency within the 180 days before filing. The session reviews your finances and confirms that bankruptcy is the right option rather than a debt management plan or another alternative.4United 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. Fees are typically $50 or less, and agencies must offer it free or at a reduced rate if you can’t afford it. The agency issues a certificate that you’ll file with your petition. Without it, the court will dismiss your case.5U.S. Department of Justice. Frequently Asked Questions (FAQs) – Credit Counseling 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.6United States Courts. Credit Counseling and Debtor Education Courses

Gather Your Documents and Complete the Forms

This stage is where most of the real work sits. You need a complete picture of your finances: every creditor with account numbers and balances, every asset from real estate down to household goods, all sources of income, and your monthly expenses.1United States Courts. Chapter 7 – Bankruptcy Basics

Supporting documents you’ll need to pull together:

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

All of that feeds into the official forms. The main document is the Voluntary Petition (Form 101), followed by a series of schedules:

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

Accuracy matters. Omitting a creditor can prevent that debt from being discharged. Undervaluing assets can create legal problems with the trustee. Errors in the schedules are the most common reason cases get complicated, which is where an attorney tends to pay for itself.7United States Courts. Bankruptcy Forms

Know What You Get to Keep

Exemption laws protect a lot of essential property. The federal exemption system, adjusted most recently in April 2025, sets these limits for Chapter 7:8Federal Register. Adjustment of Certain Dollar Amounts Applicable to Bankruptcy Cases

  • Homestead: up to $31,575 in equity in your primary residence.
  • Motor vehicle: up to $5,025 in equity in one vehicle.
  • Wildcard: up to $1,675 in any property of your choosing, plus up to $15,850 of any unused portion of the homestead exemption applied to any asset.9Office 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 exemptions instead. The rest, along with the District of Columbia, let you choose between federal and state. State exemptions vary widely: some states offer an unlimited homestead exemption, others are far more restrictive. Which set applies depends entirely on where you live, and choosing wrong can mean losing property you didn’t need to lose.

In Chapter 13, exemptions matter less because you’re keeping your property. But the value of your non-exempt assets still affects the plan, because unsecured creditors must receive at least as much through the plan as they would have in a Chapter 7 liquidation.

File the Petition with the Court

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

Attorneys file electronically. Filing without a lawyer typically means delivering physical paperwork to the clerk’s office. The filing fee is $338 for Chapter 7 and $313 for Chapter 13. If you can’t afford it, you can apply to pay in installments (up to four payments over 120 days, extendable to 180). For Chapter 7 only, you can apply for a complete fee waiver if your household income is below 150 percent of the federal poverty guidelines.10Cornell Law Institute. Federal Rules of Bankruptcy Procedure Rule 1006

What Happens the Moment You File

Filing triggers an automatic stay that halts most collection activity against you. Creditor calls stop. Lawsuits get paused. Wage garnishments stop. Foreclosure proceedings freeze. It is one of the most immediate protections bankruptcy provides.11Office 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 cases go on normally. Collection of domestic support obligations, including child support and alimony, is not stopped. A wage garnishment for child support continues even after you file.

Attend the 341 Meeting of Creditors

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

You answer questions under oath about your financial situation and the accuracy of your petition. The trustee verifies your identity, confirms that your income and assets match what’s in your schedules, and asks whether you understand the consequences of filing. No judge is present. But lying under oath can get your case dismissed and expose you to criminal penalties.1United States Courts. Chapter 7 – Bankruptcy Basics

Complete the Debtor Education Course

After filing, before discharge, you have to complete a second course, the debtor education or personal financial management course. It’s separate from the pre-filing counseling and focuses on budgeting, credit, and rebuilding after bankruptcy.6United States Courts. Credit Counseling and Debtor Education Courses

The completion certificate must be filed within 60 days after the first date set for the 341 meeting. Miss the deadline and the court will close your case without discharging your debts, defeating the purpose of filing. Like the pre-filing counseling, the course must come from an approved provider and is available online, by phone, or in person.12United States Courts. Discharge in Bankruptcy – Bankruptcy Basics

Debts That Bankruptcy Won’t Erase

Federal law lists categories of debt that survive discharge, and these catch many filers off guard:

  • Domestic support obligations. Child support and alimony cannot be discharged under any circumstances.
  • Most tax debts. Recent income taxes generally 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.
  • Student loans. Federal and private student loans survive unless you file a separate lawsuit (an adversary proceeding) and prove that repayment would impose an undue hardship. Updated federal guidance has made this somewhat more accessible, but it still requires a court determination.
  • Debts from fraud. Money obtained through false pretenses, misrepresentation, or actual fraud cannot be discharged.
  • Debts from willful injury. Intentional harm to a person or their property survives bankruptcy.
  • Drunk driving injuries. Debts from death or personal injury caused by intoxicated driving are not dischargeable.
  • Government fines and penalties. Criminal fines, penalties, and restitution orders generally survive.
  • Unlisted debts. If you leave a creditor off your schedules and they didn’t otherwise learn about your case in time, that debt may not be discharged.

The full list is in 11 U.S.C. § 523.13Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge Recent luxury purchases can also cause trouble: charges over $900 on a single credit card for luxury goods within 90 days of filing, or cash advances totaling more than $1,250 within 70 days, are presumed non-dischargeable. Running up credit cards right before filing is one of the fastest ways to invite a fraud objection.

Life After Discharge

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’s the maximum under federal law, and it applies to both Chapter 7 and Chapter 13. The impact on your credit score is most severe in the first two to three years and gradually fades as you rebuild payment history.

Bankruptcy won’t lock you out of credit forever. Secured credit cards, credit-builder loans, and small installment loans become available relatively quickly after discharge. Consistent on-time payments are what rebuild a score. Many filers see meaningful improvement within 18 to 24 months, though returning to pre-bankruptcy levels takes longer. For someone genuinely unable to repay their debt, the long-term credit hit is often less damaging than the years of missed payments, collections, and lawsuits that would happen without it.