Introduction To Bankruptcy

Offered under Federal Law through the U.S. District Court System.

Filing bankruptcy is often considered the last choice for debt relief because of its complexity and cost as well as the massive effect it has on the credit rating of the filer.

The reasons for this are varied, not least of which is the expense to file, the drastic effect on your credit rating, and the legal issues involved. However, while a last resort, it can get you out of debt!

It was designed to help debtors who were not in a position to pay their debts, for whatever reason, while offering some protection to creditors at the same time. The laws are changing all the time, usually to make it harder to obtain a full discharge of debts.

Some states also have additional laws that supplement the federal laws. It is essential that you get qualified legal help to assist you in understanding the requirements in your district and under your state laws.



Since we are not attorneys, we will not provide legal advice, but will refer you to resources where you can find a lawyer qualified to help you.

There are two bankruptcy chapters affecting individual debtors. Chapters 7 and 13 are the primary types filed, and are for individuals, joint filers (such as husband and wife), and some filers who have a small business may also fall under these chapters.

Chapter 7

Chapter 7, or Liquidation, releases the debtor from almost all obligations to pay debt, and may involve liquidation of assets. In most cases, the majority of assets of a debtor are exempt from liquidation. There are a few debts that are not dischargeable when filing. These may include student loans, fraud-related debt, Federal and State taxes, among others.

Chapter 13

Chapter 13, also known as Reorganization, is for the debtor who wishes to reorganize or restructure debt. It permits the debtor and creditors to work out a repayment plan, subject to court approval, for the repayment of debts.

Chapter 13 offers an alternative to complete liquidation, or payment of debts in full. Repayment plans are frequently structured so that only a portion of the original debt is actually paid. This plan could have your debts paid in full in less than 5 years.

Legal & Filing Fees

Legal fees start at about $800, and frequently higher, for individuals only. Fees for couples and businesses start out at $1,000 and up. You will need to spend time getting the paperwork together that your attorney needs to prepare the legal documents to file. You will also spend time with your attorney reviewing bills, answering questions, etc.

The filing fees are around $200 for individuals and couples, this is in addition to any document preparation or legal fees a paralegal or attorney may charge.


New bankruptcy laws make it harder to do the forms yourself as well as get all the exemption and other items you may qualify for. Do consider hiring a lawyer who specializes in bankruptcy to help you. You can get a free consultation now:

Can bankruptcy stop foreclosure?

What is the Chapter 7 Means Test for bankruptcy?

Go to the Bankruptcy Facts article list.

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