Bankruptcy

Know your options

• Chapter 7 — wipe out debt: Erases most unsecured debt (credit cards, medical bills) in about 3–4 months. A trustee can sell property you can’t protect. You have to pass a "means test" — roughly, income below your state’s median.
• Chapter 13 — repayment plan: For people with steady income: a 3–5 year court-approved plan to catch up on what you owe. It lets you keep your home and car and can stop a foreclosure.
• Before you file: Credit counseling from an approved agency is required first. Alternatives — negotiating with creditors, or debt settlement — may fit better, so they’re worth checking before you file.

What it does. Filing triggers an automatic stay that immediately pauses most collection — calls, lawsuits, garnishments, and foreclosure — while the case proceeds.

What it can’t erase. Some debts usually survive bankruptcy: most student loans, recent taxes, child support, and alimony.

Your credit. A bankruptcy stays on your credit report for 7 years (Chapter 13) to 10 years (Chapter 7), though many people start rebuilding well before it drops off.

A state wrinkle. The process is federal, but the exemptions — the property you’re allowed to keep — are partly set by your state, so what you can protect can differ depending on where you live.

U.S. Courts — Bankruptcy Basics ↗