Bankruptcy basics: what to understand before you choose a path

What does this part of bankruptcy cover?

This part of the site covers what you need before you can sensibly compare anything else: what bankruptcy is, what a discharge does and does not reach, who may file, what your responsibilities are once you do, and which non-bankruptcy options exist alongside it. Bankruptcy is federal law. Federal courts have exclusive jurisdiction over bankruptcy cases, so a bankruptcy case cannot be filed in a state court (Bankr. D. Md. official page — Legal Overview). The same court describes two stated purposes for the law: to give an honest debtor a fresh start by relieving most debts, and to repay creditors in an orderly manner to the extent the debtor has property available. This pillar also covers the information problem around bankruptcy, which is real: myths, marketing dressed up as advice, and debt-relief offers that collect fees before delivering anything. The detailed answers sit on the guides listed on this page. This page is a map, not the territory.

How do you know which of these applies to you?

Start with the pressure you are actually under, not with a chapter name. Someone facing a wage garnishment on the next payday is in a different position from someone whose balances are simply growing faster than income, and those two people commonly need different pages here. Federal law draws an outer boundary first: only a person that resides or has a domicile, a place of business, or property in the United States may be a debtor under the Bankruptcy Code (11 U.S.C. § 109). Within that boundary, the chapters available to individuals include Chapter 7 and Chapter 13, and the clerk must give an individual with primarily consumer debts a written description of those chapters and their general purpose, benefits, and costs before a case begins (11 U.S.C. § 342). If you cannot yet tell which situation describes you, that is normal, and it is what the Roadmap and the screening tools are for.

What do these paths have in common?

Every path in this pillar starts from the same place: more debt than the current schedule can absorb, and a decision about how to handle it. Bankruptcy and its alternatives all require you to look squarely at income, property, and who you owe, because none of them work on estimates. In a bankruptcy case, that disclosure becomes formal. A case normally begins with the debtor filing a petition, and the debtor must also file statements listing assets, income, liabilities, and the names and addresses of all creditors and how much they are owed (Bankr. D. Md. official page — Legal Overview). All information a debtor supplies is subject to examination, and knowingly concealing assets or making a false oath carries fine, imprisonment, or both (11 U.S.C. § 342). Informal alternatives skip the docket, but not the arithmetic: what comes in, what goes out, and what a creditor can reach.

Where do they differ most?

The sharpest difference is what each path does to the debt itself. A bankruptcy discharge is a court order releasing a debtor from personal liability for dischargeable debts, and it bars those creditors from contacting the debtor about them (U.S. Bankr. Ct. M.D. Ala., Consumer Pro Se Debtors Guide). A negotiated alternative depends on a creditor agreeing, and it ends when that agreement does. The second difference is what survives. Some debts are not discharged, including most taxes, most student loans, and domestic support and property settlement obligations (Bankr. E.D. La. official guidance — Chapter 7 Form Packet), and a valid lien such as a mortgage can still be enforced against the property afterward. The third is cost and formality: a bankruptcy case carries court fees set by statute and a public docket, while a repayment arrangement made outside court carries neither.

Where should you start?

Start with what bankruptcy can and cannot do, then read the alternatives, then look at your own district. That order matters, because the alternatives only make sense once you know what filing would and would not reach. Two practical points come from the courts themselves. Court staff cannot help you choose: clerk's office employees and bankruptcy judges are prohibited by law from giving legal advice (Bankr. W.D. La. official page — Don't Have an Attorney). And while individuals may represent themselves in bankruptcy court, that same court describes filing without an attorney as extremely difficult to do successfully, because the rules are technical and a misstep can affect your rights. State law matters mainly through exemptions, which set what property a filer may keep; those amounts differ by state and are covered on the exemption pages rather than here. If you want a structured place to begin, the Roadmap works through your situation and points you at the pages that fit it.

Frequently asked questions

Is a bankruptcy filing public?

Yes. Documents filed in a bankruptcy case are a matter of public record and can be reviewed by members of the general public at the clerk's office during regular business hours at no charge, and online through PACER by those with access (Bankr. N.D. Iowa official page — FAQs). Whether that matters to you depends on your circumstances, which is why privacy has its own guide in this section.

Does bankruptcy erase every debt?

No. A discharge covers dischargeable debts, and several categories sit outside it, including most taxes, most student loans, domestic support and property settlement obligations, and most fines, penalties, and criminal restitution (Bankr. E.D. La. official guidance — Chapter 7 Form Packet). A discharge also does not remove a valid lien, so a mortgage holder may still enforce it against the property after the case ends.

What does it cost to file a consumer case?

A Chapter 7 case carries a $245 statutory filing fee (28 U.S.C. § 1930(a)(1)(A), (f)(1)), a $78 administrative fee, and a $15 trustee surcharge. A Chapter 13 case carries a $235 statutory filing fee (28 U.S.C. § 1930(a)(1)(B)) plus a $78 administrative fee. Attorney fees, if you hire one, are separate and are not set by the court.

Can I file without a lawyer?

Individuals may represent themselves in bankruptcy court, though one court describes doing so successfully as extremely difficult because the rules are technical and a misstep may affect your rights (Bankr. W.D. La. official page — Don't Have an Attorney). Corporations and partnerships must have an attorney. Court employees and judges are prohibited by law from offering legal advice, so the clerk cannot fill that gap.

What is the difference between a case being dismissed and a debt being discharged?

A discharge releases a debtor from personal liability for dischargeable debts incurred before filing. A dismissal ends the case without that relief: filings can no longer be made, and an order of dismissal itself does not free the debtor from any debt (U.S. Bankr. Ct. M.D. Ala., Consumer Pro Se Debtors Guide). Cases are commonly dismissed when a required step is missed.

Where does state law come into this?

Mainly through exemptions, which determine what property a filer may keep. The process, the chapters, and the discharge rules are federal and look the same across the country, while exemption amounts are set state by state and change on their own schedules. We do not restate those figures on this page; the state and exemption pages carry them with their citations and dates.

Sources

• 11 U.S.C. § 109 — Who may be a debtor · official source
• 11 U.S.C. § 342 — Notice · official source
• Bankr. D. Md. official page — Legal Overview
• U.S. Bankr. Ct. M.D. Ala., Consumer Pro Se Debtors Guide
• Bankr. E.D. La. official guidance — Chapter 7 Form Packet
• Bankr. W.D. La. official page — Don't Have an Attorney
• Bankr. N.D. Iowa official page — FAQs
• 28 U.S.C. § 1930(a)(1)(A), (f)(1)
• 28 U.S.C. § 1930(a)(1)(B)
• Bankruptcy Court Miscellaneous Fee Schedule, Item 8
• Bankruptcy Court Miscellaneous Fee Schedule, Item 9

Related

• What bankruptcy actually is
• Chapter 7
• Chapter 13
• Exemptions: what they protect
• Build your personalised roadmap
• Find your local bankruptcy court