# 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. - URL: https://explained.page/bankruptcy-basics - Language: en - Last checked: 2026-10-29 - Watch the 1-minute animated guide: https://explained.page/watch?start=bankruptcy-basics ## Step by step 1. **Thinking about bankruptcy?** It’s a legal process to get a fresh start when debts are too much. Here’s how it works, and what you usually keep. 2. **There are two common kinds.** 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 help you keep a house or car. 3. **Filing stops most collections.** The moment you file, an “automatic stay” usually stops collection calls, lawsuits, wage garnishment and, for a time, foreclosure. 4. **Most people keep most of their things.** Laws called exemptions protect things like some home equity, a car, household goods and retirement accounts. The amounts depend on your state. 5. **Some debts usually stay.** Most student loans, child support, alimony, recent taxes and court fines usually aren’t wiped out. 6. **Take the required course first.** You must take credit counseling from an approved agency within 180 days before filing, and a money course before your debts are wiped out. 7. **Talk to a bankruptcy lawyer.** Many offer a free first meeting. Ask about other options too, like a payment plan with creditors. Bankruptcy stays on your credit report for 7 to 10 years. 8. **Look it up the right way.** Search with your town or state in the words. Pick the official site: it usually ends in .gov. Skip ads and sites that charge for free forms. ## 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 ## 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. ## 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. Source page: https://explained.page/bankruptcy-basics/questions/will-i-lose-my-house-in-bankruptcy ### 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. Source page: https://explained.page/bankruptcy-basics/questions/can-i-file-without-a-lawyer ### 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. Source page: https://explained.page/bankruptcy-basics/questions/how-much-does-it-cost-to-file-for-bankruptcy ### 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. Source page: https://explained.page/bankruptcy-basics/questions/what-is-the-means-test ### 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. Source page: https://explained.page/bankruptcy-basics/questions/how-long-does-bankruptcy-stay-on-my-credit-report ### 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. Source page: https://explained.page/bankruptcy-basics/questions/can-bankruptcy-stop-a-foreclosure ### Can student loans be wiped out in bankruptcy? Rarely. You have to prove “undue hardship” in a separate court process, though recent federal guidance has made this somewhat easier for some borrowers. Source page: https://explained.page/bankruptcy-basics/questions/can-student-loans-be-wiped-out-in-bankruptcy ### Will I lose my car in bankruptcy? Often not, if your equity is protected by your state’s exemptions and you keep up payments. Chapter 13 can also help you catch up on a car loan. Source page: https://explained.page/bankruptcy-basics/questions/will-i-lose-my-car-in-bankruptcy ## Official sources - [U.S. Courts: bankruptcy basics](https://www.uscourts.gov/) - [U.S. Trustee Program: approved credit counseling agencies](https://www.justice.gov/ust) - [CFPB: debt help](https://www.consumerfinance.gov/) To find your local office, search for: - "approved credit counseling agency [your state]" - "[your state] bankruptcy exemptions" --- General information, not legal or professional advice. Rules differ by state. From explained.page (www.explained.page). Life’s stuff, explained simply.