What the US Bankruptcy Courts does
Chapter 7 is liquidation: qualifying debts are discharged, non-exempt property may be sold by a trustee, and the process is comparatively quick. Chapter 13 is a reorganisation for people with regular income: a court-approved plan repays some debts over several years and can stop a foreclosure and cure mortgage arrears, which Chapter 7 generally cannot. Chapter 11 handles business reorganisation. Which chapter fits depends on income, assets, exemptions and what you are trying to protect — and the choice is difficult to reverse.
What it hears
- Chapter 7 liquidation and discharge of qualifying debts
- Chapter 13 repayment plans, including curing mortgage arrears
- Chapter 11 business reorganisation
- The automatic stay, and motions to lift it
- Disputes over exemptions, discharge and creditor claims
Before your first court date
Credit counseling from an approved provider is required before filing, and a financial management course before discharge. Gather everything: tax returns, pay stubs, a full list of creditors and debts, asset values, and recent transfers, because transfers and payments to family before filing are examined. Understand what bankruptcy does not erase — most student loans, recent taxes, child support and alimony, and debts from fraud. Do not run up new debt or move assets in the run-up to filing.
What happens at your first appearance
After filing, a trustee is appointed and you attend a meeting of creditors, where the trustee asks questions under oath about your paperwork; creditors may attend but often do not. In Chapter 13 the plan must then be confirmed by the court. Accuracy in the schedules matters enormously — they are signed under penalty of perjury, and omissions cause dismissed cases and denied discharges far more often than dishonesty does.
What to prepare
- Tax returns and recent pay stubs
- A complete list of creditors, balances and account numbers
- Asset values, including vehicles, retirement accounts and property
- Records of any transfers or large payments in the preceding period
- Your credit counseling certificate
When to get legal advice
This page is general legal information, not legal advice. The federal courts themselves recommend an attorney, because the chapter choice, the exemptions and what you keep are decided by rules that are unforgiving of mistakes — and court staff are prohibited by law from advising you. Legal Hotline's free line explains the process any hour on 1-844-690-0555, and a one-hour consultation with a licensed US attorney ($195, a fixed fee) can be booked right on the call.
Where it is
Each of the 94 federal districts has a bankruptcy court, with its own local rules, trustees and filing procedures.