Bankruptcy Education

Understanding Bankruptcy and Your Debt Relief Options

Learn about the US bankruptcy process, common bankruptcy chapters, potential consequences, and questions to discuss with a qualified bankruptcy attorney.

Explore Your Options Understand Bankruptcy Types

Educational information only. Bankruptcy is a legal process. Consult a qualified bankruptcy attorney for advice.

What Is Bankruptcy?

Bankruptcy is a legal process under federal law that may help individuals and businesses address debts they cannot repay. It generally involves filing a petition with a bankruptcy court and following the applicable legal procedures.

Depending on the bankruptcy chapter, the process may involve liquidating certain nonexempt assets, creating a repayment plan, or obtaining a discharge of eligible debts.

Bankruptcy can have significant financial and legal consequences. Not all debts can be discharged, and eligibility depends on individual circumstances.

Before making a decision, consider discussing your situation with a qualified bankruptcy attorney and reviewing other available debt repayment options.

Common Types of Bankruptcy

Individuals commonly encounter Chapter 7 and Chapter 13 bankruptcy. Businesses may use other chapters depending on their circumstances.

Chapter 7

Chapter 7 Bankruptcy

Chapter 7 is commonly known as liquidation bankruptcy. A bankruptcy trustee may sell nonexempt property to distribute proceeds to creditors, subject to applicable exemptions and bankruptcy rules.

• Eligibility generally involves a means test and other requirements.
• Certain property may be protected by applicable exemptions.
• Eligible debts may be discharged.
• Some debts are not dischargeable.

The availability and effect of exemptions depend on applicable federal and state law.

Chapter 13

Chapter 13 Bankruptcy

Chapter 13 is a court-supervised repayment process available to eligible individuals with regular income. It generally involves proposing a repayment plan lasting three to five years.

• Requires a repayment plan and court approval.
• May allow eligible consumers to catch up on certain secured debts.
• Generally requires regular income.
• Eligible remaining debts may be discharged after successful completion.

Plan duration, payments, and eligibility depend on statutory requirements and individual circumstances.

Other Bankruptcy Chapters

Chapter 11 is commonly used for business reorganizations and certain individuals with more complex financial situations. Chapter 12 provides specialized bankruptcy procedures for eligible family farmers and fishermen. These chapters have distinct eligibility rules and procedures.

Chapter 7 vs. Chapter 13 Bankruptcy

Both chapters can provide debt relief through bankruptcy, but their procedures and requirements are different.

Comparison	Chapter 7	Chapter 13
General approach	Liquidation of nonexempt assets where applicable.	Court-supervised repayment plan.
Income requirements	Subject to eligibility requirements, including the means test where applicable.	Requires regular income and other statutory eligibility conditions.
Typical duration	Often several months, depending on the case.	Generally a three-to-five-year repayment plan.
Property considerations	Nonexempt property may be liquidated.	A repayment plan addresses creditor claims under applicable rules.
Debt discharge	Eligible debts may be discharged.	Eligible remaining debts may be discharged after successful completion.

This is a general educational comparison, not a determination of eligibility or legal advice.

What Is the Bankruptcy Filing Process?

Bankruptcy generally involves several formal steps administered through the federal bankruptcy system.

Review Your Financial Situation

Gather information about your income, expenses, debts, assets, and financial obligations.

Consider Legal Advice

Discuss your circumstances and possible alternatives with a qualified bankruptcy attorney.

Complete Required Counseling

Individuals generally must complete an approved credit counseling course before filing, subject to statutory exceptions.

File the Petition

The required documents are submitted to the appropriate bankruptcy court.

Attend Required Proceedings

The debtor generally attends a meeting of creditors and may need to provide additional information.

Complete Applicable Requirements

Depending on the chapter, complete required courses, payments, and other legal obligations.

Which Debts May or May Not Be Discharged?

Bankruptcy does not eliminate every type of financial obligation. Discharge rules depend on the debt and applicable law.

Examples of Potentially Dischargeable Debts

• Certain credit card balances.
• Certain unsecured personal loans.
• Some medical bills.
• Certain collection accounts.
• Other eligible unsecured obligations.

Discharge depends on the type of debt, applicable rules, and any relevant objections or exceptions.

Examples of Debts Often Not Dischargeable

• Certain student loan obligations, subject to applicable legal standards.
• Certain recent tax debts.
• Child support and alimony obligations.
• Certain criminal fines and restitution.
• Certain debts arising from fraud or other specified conduct.

Some exceptions and special rules apply. A bankruptcy attorney can assess individual obligations.

Potential Consequences of Bankruptcy

Credit Report Impact

A bankruptcy filing can remain on a consumer credit report for years under applicable reporting rules.

Property and Assets

Depending on the chapter and exemptions, some assets may be subject to liquidation.

Public Court Records

Bankruptcy filings are court records and may be accessible through public record systems.

Future Borrowing

Obtaining new credit may become more difficult or expensive, depending on the lender.

Co-Signers

A bankruptcy discharge generally does not automatically eliminate another person's liability on a shared debt.

Long-Term Planning

Consumers may need to review budgets, credit use, and future financial goals after bankruptcy.

Alternatives to Consider Before Bankruptcy

Depending on your financial circumstances, other debt management approaches may be worth reviewing.

Debt Settlement

Understand negotiated debt resolution and its risks.

Learn more →

Debt Consolidation

Explore ways to combine multiple debts into one payment.

Learn more →

Credit Counseling

Learn about financial counseling and repayment guidance.

Learn more →

Bankruptcy FAQs

Chapter 7 generally involves liquidation of nonexempt assets where applicable, while Chapter 13 generally involves a court-approved repayment plan lasting three to five years for eligible individuals.

No. Certain debts, including child support, alimony, and some tax and student loan obligations, may not be dischargeable. The rules depend on the type of debt and applicable law.

Under the Fair Credit Reporting Act, bankruptcy information may generally be reported for up to ten years from the filing date. Reporting periods and circumstances can vary.

Not necessarily. The outcome depends on the bankruptcy chapter, home equity, applicable exemptions, mortgage payments, and other circumstances. Discuss property protection with a qualified attorney.

Depending on the chapter, applicable exemptions, vehicle equity, loan status, and payment arrangements, keeping a vehicle may be possible. An attorney can review your circumstances.

Individuals may represent themselves in bankruptcy, but the process has complex legal requirements and serious consequences. Consulting a qualified bankruptcy attorney is advisable.

Filing bankruptcy generally triggers an automatic stay that restricts many collection activities, subject to exceptions and court orders. The stay does not necessarily apply to every action or situation.

It may be possible to obtain credit after bankruptcy, but approval and terms depend on the lender and your financial profile. New borrowing may involve higher costs.

Debt settlement is one possible alternative, but it carries risks and is not suitable for everyone. Compare all relevant options and discuss legal questions with a qualified professional.

Important Legal Disclaimer

This page provides general educational information about bankruptcy in the United States. It is not legal, financial, tax, or credit advice. DebtCareSupport is not a law firm and does not provide bankruptcy representation or legal services. Bankruptcy laws and outcomes depend on individual facts and applicable federal and state law. Consult a qualified bankruptcy attorney for advice about your circumstances.

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