Are you facing overwhelming debt and can’t make any progress in paying it off? Watching your debt grow because you can’t make ends meet is stressful. If you earn less each month than you spend, even after eliminating all luxuries from your budget, you may be considering whether bankruptcy is the right choice for you.

Bankruptcy is not to be taken lightly since it involves a legal process and can impact your credit for up to ten years. Before filing for bankruptcy, you’ll want to ensure you’ve considered all possible solutions including other debt relief options.

What bankruptcy can offer people or businesses who are drowning in debt, is a chance to start over without creditors taking actions against you, such as garnishing wages, calling to demand payment, or bringing lawsuits against you. To file for Chapter 7 bankruptcy, you will need to complete a series of steps:


  1. Establish whether Chapter 7 bankruptcy is right for you
  2. Gather all your financial documents
  3. Complete an approved credit counseling course before filing
  4. Prepare all bankruptcy forms
  5. File your bankruptcy forms and pay the state filing fee
  6. Mail any forms requested by your trustee
  7. Attend a meeting with your trustee
  8. Follow the stated plan regarding your secured debt
  9. Complete a second follow up credit counseling course
  10. Receiving your official discharge

What is Bankruptcy?

Bankruptcy is a legal process where the debtor asks for the court’s assistance to force creditors to back off or go away entirely. In centuries past, people went to debtor’s prison. And as a result, friends or relatives might have paid the debt to release their troubled from jail. The modern law offers a fresh start instead for people or businesses who are unable to repay their debts.

Bankruptcy is a serious action that brings long-term consequences. It declares to the world that you needed help, and that you broke some promises made to people who extended credit to you. It will linger on your credit report, negatively impact your credit score, and make it harder to get a good loan in the future.

What Bankruptcy Options Are Available to Consumers?

There are several types of bankruptcy, so it’s vital to determine which one is right for your situation. Consumers typically choose between Chapter 7 or Chapter 13 bankruptcy.

Chapter 7

Chapter 7 bankruptcy is the fastest growing and most common form of bankruptcy among individuals. In 2019, 63 percent of personal bankruptcy filings were Chapter 7.

Chapter 7 bankruptcy discharges or forgives your unsecured debt, like credit card debt, medical bills, and personal loans. If successful, you will not have any further obligation on discharged debts. However, it doesn’t typically help with some debts such as alimony, child support, back taxes, court fees, or student loans.

When trying to qualify for Chapter 7 bankruptcy, you must:

  • Be an individual, a corporation or other business entity, or a partnership
  • Not have filed a prior bankruptcy petition in the last 180 days or one that was dismissed for failure to appear before the court or complete orders including payment of the filing fee.

If you aren’t able to pay off your debt in less than five years and don’t have many assets, this may be the right option.

Chapter 13

Chapter 13 bankruptcy provides a plan for restructuring your debts so that you can pay them off over a three to five year period. This type of bankruptcy is better for individuals who have secured debts like mortgages or assets they want to keep and can repay at least some of what they owe.

Steps to File for Chapter 7 Bankruptcy

Bankruptcy takes several months, typically four to six. As with any legal process, it’s vital to complete all the necessary steps promptly, or you’ll be denied. These ten steps will take you through the process of how to file for Chapter 7 bankruptcy.

1. Determine if filing for Chapter 7 bankruptcy is right for you

Before filing, make sure you qualify for Chapter 7 bankruptcy and that it is the best option for you. Any non-exempt assets (cars, boats, investment real estate, brokerage accounts) may be sold off during the process to help pay off as much debt to creditors as is possible. Before filing, learn your state’s exemption laws so you know what types of properties you can keep when filing for Chapter 7 bankruptcy. These vary widely from state to state especially with regard to your homestead, and whether you can keep it.

During the process, you’ll have to pass a means test to make sure you’re eligible unless your debt is primarily business-related. This test assesses whether you have enough disposable income after subtracting allowed expenses to repay at least some of your unsecured debts. If you do, then you may not qualify. Most people at the point they are considering bankruptcy do not have a problem passing the means test. The means test was put into place to ensure that borrowers were not using bankruptcy laws to take unfair advantage of lenders by acquiring assets and just choosing not to pay their bills, even though they could afford them.

2. Gather all your financial documents

Before starting the filing process, be sure you fully understand your current finances. Be sure you know all your sources of debt, both secured and unsecured debt. You’ll want to gather:

  • Your credit reports
  • Tax returns at least for the last two years
  • Recent bank account statements
  • Appraisals of any property you own
  • List of all debts including anything not on your credit reports
  • Pay stubs for the previous six months
  • Retirement accounts
  • Vehicle registrations

3. Complete an approved credit counseling course

In the six month period before you file your bankruptcy petition, you’ll need to complete a credit counseling class that is approved by the Department of Justice. The courses typically take about an hour and can be done online. While there is a small fee, you may qualify to have it waived. You’ll need to provide the court with a copy of your certificate when you file for bankruptcy.

4. Prepare all bankruptcy forms

There are multiple forms you’ll need to complete. These forms will ask you about your debts, assets, how much money you make, and more.  

You’ll need to make a copy of all forms, one for you and one for the court..

5. File your bankruptcy forms and pay the filing fee

You will need to file your bankruptcy forms and pay the filing fee at your local courthouse. If you can’t pay for the filing fee, you can request a payment plan or a waiver if you qualify. You’ll receive your bankruptcy case number, the name of your bankruptcy trustee, and the day and time of your Meeting of Creditors either before you leave or within a few days of filing.

At this point, you will have an “automatic stay” that protects you from debt collectors. Once they are informed by the court that you have filed for bankruptcy, they are not allowed to contact you either by phone, by mail, or in person. If they do, they have committed a “stay violation” and can be accountable to you. Keep your ears open for any communication like this. You can gather evidence of their violation and call the Stay Violation Hotline. If you have a case, you could get paid up to $1000. That money might just come in handy.

6. Mail any forms requested by your trustee

Your Chapter 7 appointed trustee is an official appointed by the court who oversees your case, including liquidating any nonexempt property if necessary.

They will need information from you during this process, so be on the lookout for mail from them. Provide the documents they need promptly to keep your case moving forward.

7. Attend a meeting with your trustee

You will need to go to the Meeting of Creditors. This usually occurs about a month after you file. The purpose is to verify your identity and ask some standard questions about your finances and paperwork. Creditors can also attend, but most of the time they do not. This meeting typically doesn’t last long, but you must attend.

8. Follow the stated plan regarding your secured debt

Early in the process, you may state how you would proceed to make payments toward a secured debt, such as how you’d pay back debt owed on a vehicle. You’ll need to follow through on any plans regarding your secured debt before your case can be completed.

9. Complete another education course

After filing, you’ll need to complete a final debtor education course by a specified date. Be sure to follow through as you’ll need your certificate to receive a discharge of your debt. If you don’t complete it in time, you may owe additional fees and have to file a motion to have your case reopened, which has an added cost.

10. Receive your official discharge of your debt

After completing all the required steps, you’ll receive your official order that discharges all your qualifying debts. At this point, you are no longer legally obligated to pay for the debts that were discharged.

Filing for Bankruptcy Takes Preparation

If you’ve fallen behind on debts or are being regularly called by collection agencies, filing for bankruptcy may be the right choice for you. This legal process takes time and involves several steps to complete successfully. The better prepared you are, the more manageable the process. Many people have lots of questions when considering bankruptcy. Talking with a qualified individual can help.

Looking for free bankruptcy advice? Call the Free Bankruptcy Advice Hotline at (888) 734-2585.

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