What Happens When You Declare Bankruptcy: Trustee, Discharge, and Credit Impact

When you declare bankruptcy, filing the petition immediately stops most collection activity against you, hands your case to a court-appointed trustee, and sets in motion a process that ends with a discharge wiping out qualifying debts. A Chapter 7 case runs about four to six months and may involve selling non-exempt property. A Chapter 13 case runs three to five years and routes your income through a repayment plan. Some debts survive either way, and the filing stays on your credit report for years after it ends.

The Moment You File, Collection Stops

The second your petition reaches the court, a federal injunction called the automatic stay takes effect. No separate order is needed.¹ Creditors have to stop calling, writing, and emailing. Pending lawsuits pause. Foreclosure sales get postponed. Wage garnishments for consumer debts have to end.

The stay does not reach everything. Criminal proceedings continue. Family law matters, including actions to establish or modify child support, determine paternity, or address domestic violence, keep moving. The government can still audit your taxes and send deficiency notices. Collection of domestic support obligations from property outside the bankruptcy estate also continues.²

If a creditor knowingly violates the stay, you can recover actual damages, court costs, and attorney fees, and the court may award punitive damages in some situations.¹

The stay is weaker if you have filed before. If one of your bankruptcy cases was dismissed in the past year and you file again, the stay lasts only 30 days unless the court extends it on a showing that your new filing is in good faith. If two or more cases were dismissed in the past year, the stay does not go into effect at all, and you would have to ask the court to impose it after a hearing.²

A Trustee Takes Over Your Case

Shortly after you file, the U.S. Trustee Program, a division of the Department of Justice, assigns a private trustee to administer your case.³ The trustee is not a government employee but works with the U.S. Trustee to protect the integrity of the process.⁴

In a Chapter 7 case, the trustee’s main job is to collect any non-exempt property, sell it, and pay creditors from the proceeds.⁵ In a Chapter 13 case, the trustee collects your monthly plan payments and distributes them to creditors. In both, the trustee reviews your financial records, tax returns, and bank statements for accuracy and signs of abuse.

You Attend a Meeting of Creditors

About 21 to 40 days after you file, you appear at a proceeding called the meeting of creditors, sometimes called the 341 meeting. The trustee runs it, not a judge. You testify under oath. Bring identification: typically a government-issued photo ID and your Social Security card.

Creditors get notice of the meeting and have the right to attend and question you about your assets, income, and financial history. For a straightforward consumer case, they rarely show up. If your paperwork is in order, the meeting usually takes 10 to 15 minutes. If the trustee needs more information, it can be continued to a later date.

What Happens to Your Property

Chapter 7: Exemptions Decide What You Keep

In a Chapter 7 case, the trustee looks at everything you own, sets aside what the law lets you protect under exemptions, and sells the rest to pay creditors. For cases filed between April 2025 and March 2028, the federal exemptions include:⁶

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, plus up to $15,800 of any unused homestead exemption, applied to any property.

Many states have their own exemption systems, and some require you to use the state version rather than the federal one. When everything you own fits within the applicable exemptions, the trustee reports your case as a “no-asset” case and creditors receive nothing from the estate. Most consumer Chapter 7 cases end this way.

Chapter 13: You Pay Through a Plan Instead

Chapter 13 lets you keep your assets while you repay debts through a court-approved plan lasting three to five years. If your income is below your state’s median, the plan runs for three years unless the court approves a longer period. If your income is above the median, the plan generally runs for five.

Your debts fall into three groups under the plan. Priority debts, such as recent tax obligations and domestic support, must be paid in full. Secured debts like a mortgage or car loan are paid according to the plan’s terms so you can keep the collateral. General unsecured debts, such as credit cards and medical bills, get whatever your remaining disposable income covers, which may be only a fraction of what you owe. Miss payments and the case can be dismissed, which lifts the automatic stay and exposes you to collection again.

Debts That Don’t Go Away

Bankruptcy does not erase every obligation. Federal law carves out specific categories that survive a discharge in both Chapter 7 and Chapter 13.⁷ The most common:

Domestic support obligations. Child support and alimony cannot be discharged.
Student loans. Government-backed and qualified private education loans survive unless you prove in a separate court proceeding that repaying them would impose an undue hardship, a difficult standard.
Certain tax debts. Income taxes generally survive if the return was due within three years before you filed, or if the return was filed late and less than two years before the petition date. Taxes connected to fraud or willful evasion are never dischargeable.⁸
Criminal fines and restitution. Any financial obligation tied to a criminal sentence stays.
Recent luxury purchases. Consumer debts above $900 for luxury goods incurred within 90 days before filing are presumed nondischargeable, as are cash advances over $1,250 taken within 70 days before filing.⁷
Debts from fraud or intentional harm. Money obtained through false pretenses or fraud, and damages for willful and malicious injury to another person or their property, cannot be discharged.

Chapter 13 offers a slightly broader discharge for some categories of debt, but domestic support, student loans, and criminal obligations survive under both.⁹

The Discharge

The discharge is the court order that formally eliminates your personal liability for qualifying debts. Once it is entered, creditors are permanently barred from trying to collect those debts: no phone calls, no lawsuits, no letters.¹⁰

In Chapter 7, the discharge typically arrives four to six months after filing. The timing depends on the 60-day objection period that follows the meeting of creditors; if no one objects, the court issues the discharge shortly after that window closes. Chapter 13 discharges come only after you successfully complete all payments under your three- to five-year plan.⁹ Before the discharge is entered in either chapter, you also have to complete a personal financial management course and file proof with the court. In Chapter 7, you generally need to finish it within 45 days after your meeting of creditors; in Chapter 13, before your final plan payment. Skip it and no discharge is issued. The court then sends the discharge order to every creditor and the trustee, and your case is formally closed.

What It Costs

The court filing fee for a Chapter 7 case is $338, which includes a filing fee, an administrative fee, and a trustee surcharge. A Chapter 13 petition costs $313. If you cannot pay upfront, you can ask the court to let you pay in installments or, in Chapter 7, to waive the fee entirely based on your income.

Attorney fees vary with location and complexity. Chapter 7 fees commonly run $600 to $3,000. Chapter 13 fees are typically $3,000 to $5,000 because the attorney stays involved through the life of the plan, and most Chapter 13 attorneys fold their fees into the plan itself so you pay them over time. The two mandatory counseling courses, one before filing and one after, run $20 to $100 combined.

How Long It Shows on Your Credit

A bankruptcy filing can remain on your credit report for up to 10 years from the date the order is entered.¹¹ As a practical matter, the major credit bureaus often remove a completed Chapter 13 case after seven years, though the statute allows up to ten.

During that period, the bankruptcy will be visible to lenders, landlords, and employers who pull your credit report. The hit to your score is sharpest in the first year or two and fades as you rebuild. Many people who receive a discharge qualify for secured credit cards and small loans relatively soon after their case closes, though interest rates tend to run higher than average until the filing ages off the report.

1
Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay
2
Office of the Law Revision Counsel. 11 US Code 362 – Automatic Stay
3
U.S. Department of Justice. About the United States Trustee Program
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U.S. Department of Justice. Private Trustee Information
5
Office of the Law Revision Counsel. 11 USC 704 – Duties of Trustee
6
Federal Register. Adjustment of Certain Dollar Amounts Applicable to Bankruptcy Cases
7
Office of the Law Revision Counsel. 11 US Code 523 – Exceptions to Discharge
8
Internal Revenue Service. Publication 908, Bankruptcy Tax Guide
9
Office of the Law Revision Counsel. 11 USC 1328 – Discharge
10
Office of the Law Revision Counsel. 11 USC 727 – Discharge
11
Consumer Financial Protection Bureau. How Long Does a Bankruptcy Appear on Credit Reports