How to File for Bankruptcy in the USA

Let’s be real—no one wants to file for bankruptcy. But if you’re drowning in debt with no lifeline in sight, it can be the fresh start you desperately need. The process might seem scary, but we’re breaking it down into simple, actionable steps so you know exactly what to expect. Whether you’re considering Chapter 7 (a clean slate) or Chapter 13 (a repayment plan), this guide walks you through the process from start to finish.

Step 1: Know Your Bankruptcy Options

Not all bankruptcies are the same. The right choice depends on your income, debts, and financial goals.

Chapter 7 (Liquidation) – Best if you have little to no disposable income. Non-essential assets (like a second car or expensive jewelry) may be sold to pay off debts, but many people keep basics like their home and primary car thanks to exemptions. Most unsecured debts (credit cards, medical bills) are wiped out in 3-6 months.
Chapter 13 (Repayment Plan) – Ideal if you have steady income but need to catch up on missed payments (like a mortgage or car loan). You’ll propose a 3-5 year repayment plan, and if you stick to it, leftover unsecured debts may be forgiven.
Other Types (Less Common)
- Chapter 11 – Mostly for businesses restructuring debt.
- Chapter 12 – For family farmers/fishermen.
- Chapter 9 – For municipalities (yes, cities can go bankrupt too!).

Quick Tip: Most individuals file Chapter 7—it’s faster and simpler if you qualify.

Step 2: Get Your Financial Ducks in a Row

Before filing, you’ll need to gather every financial document imaginable. Skipping this step can delay or even derail your case.

Must-Have Documents:
✔ Credit reports (get free copies from AnnualCreditReport.com)
✔ List of all debts (credit cards, loans, medical bills, overdue taxes)
✔ Proof of income (pay stubs, last 2 years of tax returns)
✔ Bank statements (last 6 months)
✔ Property and vehicle valuations (Zillow estimates or Kelley Blue Book for cars)

See More: Top Auto Insurance Companies in USA, UK and Canada

Why It Matters: The court needs a full snapshot of your finances. Hiding assets or debts can lead to denial of discharge or even fraud charges.

Step 3: Take the Mandatory Credit Counseling Course

Before you can file, the law requires you to complete a credit counseling course from an approved provider (usually online or by phone). It takes about 1-2 hours and costs

−

10−50, but fee waivers exist if you’re broke.

What You’ll Learn:

Alternatives to bankruptcy (like debt settlement or budgeting).
Whether bankruptcy is truly your best option.

Don’t Skip This! You can’t file without the completion certificate.

Step 4: Fill Out the Bankruptcy Forms (The Paperwork Marathon)

This is the most tedious part. You’ll need to complete:

Official bankruptcy forms (like the petition, schedules of assets/liabilities).
Local court forms (check your district’s bankruptcy court website).

Biggest Mistakes to Avoid:
❌ Guessing numbers – Estimates can trigger audits.
❌ Leaving out debts – Even if you plan to keep paying a car loan, list it.
❌ Forgetting small assets – That $500 gaming console? It counts.

Pro Tip: Use the U.S. Courts’ official forms (www.uscourts.gov) or consider a bankruptcy petition preparer (cheaper than a lawyer).

Step 5: File Your Case (and Get Immediate Relief)

Once your forms are ready, file them at your local federal bankruptcy court. Here’s what happens next:

Filing Fee: $338 for Chapter 7 (can be waived if you’re very low-income).
Automatic Stay: The moment you file, creditors must stop calls, lawsuits, wage garnishments, and even evictions (temporarily).

What to Expect After Filing:

You’ll get a case number and trustee assigned.
The trustee will review your paperwork and may ask for more documents (like recent pay stubs).

Step 6: Attend the 341 Meeting (The “Creditors’ Meeting”)

Don’t let the name scare you—most creditors don’t show up. But you must attend this 10-minute meeting with the trustee.

Common Questions They’ll Ask:

“Did you list all your assets and debts?”
“Have you transferred any property recently?”
“Do you owe child support or alimony?”

Bring: Your ID, Social Security card, and any documents the trustee requested.

Step 7: Take the Second Course (Debtor Education)

Before your debts are wiped out, you’ll need to complete a financial management course (different from the first one). It covers budgeting and rebuilding credit.

Cost: Another

−

10−50, but worth it—no discharge without it!

Step 8: Get Your Discharge (Freedom!)

If all goes well:

Chapter 7: Debts are discharged in 3-4 months.
Chapter 13: Discharge comes after 3-5 years of successful payments.

What’s Next?

Rebuild credit (secured credit cards help).
Keep all bankruptcy paperwork forever—lenders may ask for it later.

Should You Hire a Lawyer?

Situation	DIY?	Lawyer Recommended?
Simple Chapter 7 (no assets, straightforward debts)	✅ Yes	❌ No
Chapter 13 (complex repayment plan)	❌ No	✅ Absolutely
Own a business or rental properties	❌ No	✅ 100%