What Happens When You File for Bankruptcy?

The process varies depending on which type of bankruptcy you pursue, Chapter 7 or Chapter 13.

Written by Ben Luthi / June 29, 2022

Quick Bites

  • Bankruptcy is a serious decision, so it's important to consider all other options before you proceed.
  • Consider hiring a bankruptcy lawyer who can guide you through the process.
  • Bankruptcy proceedings can vary based on which type you file.

If you're thinking about filing for bankruptcy, it's important to understand the process, so you can be prepared. Depending on which type of bankruptcy you file—Chapter 7 or Chapter 13—the process can look different.

A Chapter 7 bankruptcy discharge typically takes four to six months while Chapter 13 can last three to five years. You'll take a credit counseling course and debtor education course and work with a trustee to liquidate your assets or make your monthly payments.

Here's what you need to know about the full, eight-step process.

Inside this article

  1. 1. Collect your documents
  2. 2. Take a credit counseling course
  3. 3. Consider hiring an attorney
  4. 4. Submit your petition
  5. 5. You'll be assigned a trustee
  6. 6. Complete a debtor course
  7. 7. Attend a meeting of creditors
  8. 8. Move toward a discharge
  9. FAQs

1. Collect your documents

To get an accurate view of your financial situation, you'll want to gather the following documents:

  • Tax returns for the past two years

  • Pay stubs or other proof of income for the past several months

  • Recent bank statements

  • Recent retirement and other investment account statements

  • Other documents related to your assets, debt and income

  • The most recent appraisal for any real estate that you own

You'll want to provide these documents to credit counselors and bankruptcy attorneys during your consultations.[1]

2. Take a credit counseling course

Before you can file for bankruptcy, you'll need to take a credit counseling course within six months of your filing date. The course must be completed with a Justice Department-approved credit counseling agency.[2, 3]

The cost can typically range from $10 to $50, but the agency will waive the fee if your income is 150% of the poverty guideline for your household size and state of residence.[1]

A credit counselor can help you evaluate your situation and determine if bankruptcy is necessary, and also provide some potential alternatives. Make sure you keep the certificate you receive at the end of the course.

3. Consider hiring an attorney

After credit counseling, it's a good idea to consult with a bankruptcy lawyer. With their experience and expertise, they can help you determine which type of bankruptcy to consider and what the process will look like for your specific situation. In many cases, attorneys offer this initial consultation for free.[4]

You'll also want to consider whether or not to hire a bankruptcy lawyer to help you through the process. They can guide you through your bankruptcy, but they may charge up to a few thousand dollars, depending on where you live.[4]

Of course, you can certainly go through bankruptcy on your own and save that money. But unless you understand the bankruptcy process, some of the potential downsides may include filing the wrong chapter type, failing to protect yourself and your property and missing some of the requirements from the court. That could add to the expense or time it takes for a bankruptcy discharge.

4. Submit your petition

There are several different forms you'll need to fill out when you file your petition for bankruptcy. In addition to the petition, you'll need to pay the bankruptcy filing fee, which is $313 for Chapter 13 and $338 for Chapter 7, and also include your credit counseling certificate.[2,5]

Tip

If you can't afford the filing fee, you may be able to set up a payment plan or, if your income is below 150% of the poverty guideline, get it waived.[1]

Within seven days of filing, you'll need to provide the court with the following:

  • Bankruptcy petition cover sheet

  • Statement about your Social Security Numbers

  • List of creditors

And within 14 days of filing your petition, you'll need to provide the following documents:

  • Declaration Under Penalty of Perjury for Debtor without Attorney (if applicable)

  • Schedule A/B (Property)

  • Schedule C (Property You Claim as Exempt)

  • Schedule D (Creditors Who Hold Claims Secured by Property)

  • Schedule E/F (Creditors Who Have Unsecured Claims)

  • Schedule G (Executory Contracts and Unexpired Leases)

  • Schedule H (Your Co-debtors)

  • Schedule I (Your Income)

  • Schedule J (Your Expenses)

  • Schedule J-2 (Expenses for Separate Household of Debtor 2)

  • Summary of Your Assets and Liabilities and Certain Statistical Information

  • Declaration About an Individual Debtor’s Schedules

  • Statement of Financial Affairs

  • Chapter 7 Statement of Your Current Monthly Income (if applicable)

  • Chapter 7 Means Test Calculation (if applicable)

  • Chapter 13 Statement of Current Monthly Income and Calculation of Commitment Period (if applicable)

  • Chapter 13 Calculation of Your Disposable Income (if applicable)

  • Chapter 13 Plan (if applicable)

  • Statement of Intention

  • Bankruptcy Petition Preparer’s Notice, Declaration and Signature (if applicable)

  • Statement of Petition Preparer Pursuant to F.R.BANKR.P 2016(c) (if applicable)

Note that the courts typically prefer if you file all of these documents at the same time as submitting your petition. You can find the forms through your local court's website. You'll file your petition and necessary documents at your local courthouse.[1,2,6,7]

5. You'll be assigned a trustee

After you file your petition, the court will appoint a trustee to handle your case. How that case is handled will vary depending on which type of bankruptcy you file. In either case, the trustee will likely request some documents from you to get the process started.

Chapter 7

With Chapter 7 bankruptcy, the trustee will collect your non-exempt assets, liquidate them and distribute the proceeds to your creditors. There is a federal list of exempt assets, along with amounts.[2,8]

However, depending on where you live, your state may have its own list of exemptions that it uses in place of the federal list. In some states, the court may give you the choice between your state's list and the federal list.[2]

As a result, it's a good idea to consult with a bankruptcy lawyer or the local court to get an idea of which assets you can keep.

"Generally, you’ll be able to keep your house, your car and your personal belongings," says Lyle Solomon, principal attorney at Oak View Law Group, a debt relief firm. Additionally, you may be able to keep certain amounts of otherwise non-exempt property.

"Say your state laws allow you to keep assets whose total worth cannot exceed $3,000, and you have a piece of jewelry worth $1,500 that you want to keep," says Solomon. "Using the bankruptcy schedule, you [might] get it exempted."

Photo of Lyle Solomon

Meet the Expert

Lyle Solomon, principal attorney at Oak View Law Group, a debt relief firm

Chapter 13

Your trustee won't have to liquidate any of your assets with a Chapter 13 bankruptcy. But they will evaluate your financial situation and make recommendations about your repayment plan. Once the repayment plan is set, you'll make your payments to your trustee, who will distribute them to your creditors.[2, 8]

6. Complete a debtor education course

On top of the credit counseling course you took before you filed, you'll also need to take a debtor education course to qualify for the discharge of your debts. The purpose of this course is to provide you with information about how to make good financial decisions going forward, including budgeting, debt management and more.[1]

As with the credit counseling course, you'll need to take this one from an approved credit counseling agency. The cost can range from $10 to $50, but a waiver is possible if you're eligible based on your income.[1]

7. Attend your meeting of creditors

Also called a 341 meeting, the meeting of creditors is a short meeting that takes place about a month after you submit your petition. You'll receive information from the court and when and where the meeting will take place.[2]

Your trustee will use this meeting to verify your identity and ask you some questions about your situation. Bring your government-issued ID, Social Security card and any other documents your trustee requests.[1]

"Creditors rarely come to these meetings, but when they do, they ask about financial matters," says Solomon. In most cases, the meeting may only last a handful of minutes.[1,2]

8. Move forward with liquidation or repayment

If you file for Chapter 7 bankruptcy, you'll work with the trustee to provide the non-exempt assets you detailed in your petition, so they can liquidate them. The entire process, from start to finish, can take four to six months, after which your bankruptcy will be discharged.[9]

In contrast, if you file for Chapter 13 bankruptcy, you'll start making payments on your court-approved repayment plan. Depending on your income and other factors, the plan can take three to five years to complete (much like a debt management program with a nonprofit counseling agency). The court will use the Chapter 13 Calculation of Your Disposable Income form to determine your monthly payment.[10]

Once you've completed your repayment plan, the court will discharge your bankruptcy. [10]

FAQs

Are bankruptcies public records?

Unless a bankruptcy has been sealed, it is public information that anyone can access if they visit the local court's clerk's office or through the Public Access Court Electronic Records (PACER) program.[11]

However, both the court and the online program will charge a per-page fee for copies of bankruptcy documents.[12]

How does bankruptcy affect credit?

The most influential factor in your FICO score is your payment history, which means that bankruptcy can be devastating to your credit score. It can be extremely difficult to get approved for credit while your bankruptcy is still open, and even after it's been discharged, your credit options may be limited to loans and credit cards with high interest rates and fees.[13, 14]

Additionally, a Chapter 13 bankruptcy will remain on your credit reports for seven years, while a Chapter 7 bankruptcy will stay on your reports for 10 years.[14]

While the negative impact of that public record will diminish over time, it's important to look for opportunities to rebuild your credit as soon as possible.

Article Sources
  1. "How To File Bankruptcy for Free: A 10-Step Guide," Upsolve, April 19, 2022, https://upsolve.org/learn/how-to-file-bankruptcy/.
  2. "Chapter 7 - Bankruptcy Basics," U.S. Courts, https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics.
  3. "LIST OF CREDIT COUNSELING AGENCIES APPROVED PURSUANT TO 11 U.S.C. § 111," U.S. Department of Justice, https://www.justice.gov/ust/list-credit-counseling-agencies-approved-pursuant-11-usc-111.
  4. "How Do I Find an Affordable Bankruptcy Attorney?," Upsolve, March 21, 2022, https://upsolve.org/learn/using-a-fee-waiver-for-free-bankruptcy-credit-counseling/.
  5. "Bankruptcy Fee Schedule," U.S. Bankruptcy Court - District of Nevada, https://www.nvb.uscourts.gov/filing/filing-fees/fee-schedule/.
  6. "Chapter 7 Required Documents Checklist," U.S. Courts, https://www.mieb.uscourts.gov/sites/default/files/prose/Chapter%207%20Required%20Documents%20Checklist.pdf.
  7. "Chapter 13 Required Documents Checklist," U.S. Courts, https://www.mieb.uscourts.gov/sites/default/files/prose/Chapter%2013%20Required%20Documents%20Checklist.pdf.
  8. "Private Trustee Information," U.S. Department of Justice, https://www.justice.gov/ust/private-trustee-information.
  9. Andrea Wimmer, "How Long Does A Chapter 7 Bankruptcy Take?," Upsolve, March 21, 2022, https://upsolve.org/learn/how-long-does-chapter-7-take/.
  10. "Chapter 13 - Bankruptcy Basics," U.S. Courts, https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-13-bankruptcy-basics.
  11. "Is Bankruptcy Information Available to the Public?," U.S. Bankruptcy Court, https://www.canb.uscourts.gov/faq/general-bankruptcy/bankruptcy-information-available-public-can-anyone-look-it.
  12. "PACER Pricing: How fees work," PACER, https://pacer.uscourts.gov/pacer-pricing-how-fees-work.
  13. "Restrictions on Obtaining Credit During Bankruptcy," Luftman, Heck & Associates LLP, Cleveland Bankruptcy Attorneys, https://www.clevelandbankruptcyattorney.com/life-during-bankruptcy/obtaining-credit/.
  14. "How Can I Reestablish Healthy Credit Habits After Bankruptcy?" Equifax, https://www.equifax.com/personal/education/personal-finance/rebuilding-credit-after-bankruptcy/.

About the Author

Ben Luthi

Ben Luthi

Ben has been writing about money since 2013. He's been on staff at NerdWallet as a credit card writer and for Student Loan Hero, where he covered student loans and other personal finance topics. Ben's work has appeared in U.S. News, The New York Times, Experian, FICO, Credit Karma, Bankrate and more

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