Bankruptcy: how it works and what you keep
Bankruptcy is a legal way to get a fresh start. Chapter 7 wipes out many debts in a few months if your income qualifies; Chapter 13 is a 3 to 5 year payment plan that can save a house or car. Filing stops most collections. State exemptions protect many things you own. Most student loans, child support, recent taxes and fines usually remain. You must take an approved credit counseling course first.
Your checklist
- Learn Chapter 7 vs Chapter 13
- Know that filing stops most collections
- Check what exemptions protect
- Know which debts usually stay
- Take the counseling course first
- Talk to a bankruptcy lawyer
Rather read it? Here’s the whole thing.
Two common types
- Chapter 7: wipes out many unsecured debts, like credit cards and medical bills, often in about 4 to 6 months. You must pass a “means test” based on your income.
- Chapter 13: a 3 to 5 year court-approved payment plan. Often used to catch up on a mortgage or car loan and keep them.
The automatic stay
Filing usually stops collection calls, lawsuits, wage garnishment and, for a time, foreclosure.
What you keep
Exemptions protect things like some home equity, a car, household goods, tools for work and most retirement accounts. The amounts depend on your state.
Debts that usually remain
Most student loans, child support, alimony, recent taxes and court fines.
Required steps
Take credit counseling from an approved agency within 180 days before filing, and a debtor education course before your debts are discharged. Federal filing fees apply, and Chapter 7 fees can sometimes be paid in installments or waived.
Your credit
A bankruptcy can stay on your credit report for 7 years (Chapter 13) to 10 years (Chapter 7), but many people start rebuilding credit soon after.
Get advice
Many bankruptcy lawyers offer a free first meeting. Ask about alternatives too.
Official sources, and where to look
- U.S. Courts: bankruptcy basicsuscourts.gov
- U.S. Trustee Program: approved credit counseling agenciesjustice.gov
- CFPB: debt helpconsumerfinance.gov
approved credit counseling agency [your state][your state] bankruptcy exemptions
Common questions
Will I lose my house in bankruptcy?
Not necessarily. It depends on your equity, your state’s exemptions and whether you’re current on payments. Chapter 13 can help you catch up and keep it. More ›
Can I file without a lawyer?
You can, but mistakes can cost you property or your case. Many people use a lawyer, especially for Chapter 13. More ›
How much does it cost to file for bankruptcy?
There are federal court filing fees (a few hundred dollars), plus lawyer fees if you hire one. Chapter 7 fees can sometimes be paid in installments or waived for low incomes. More ›
What is the means test?
A calculation that compares your income with your state’s median to see whether you qualify for Chapter 7, or need to use Chapter 13. More ›
How long does bankruptcy stay on my credit report?
Up to 10 years for Chapter 7 and 7 years for Chapter 13. Many people begin rebuilding credit within a year or two. More ›
Can bankruptcy stop a foreclosure?
Filing usually pauses it through the automatic stay. Chapter 13 can let you catch up on missed payments over time and keep your home. More ›
Talk to a bankruptcy lawyer near you
Many offer a free first meeting.
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Not yet reviewed by an expert. Last checked 2026-10-29. This is general help, not legal, medical or professional advice. Rules are different in every state.