What Bankruptcy Can and Cannot Do

What does bankruptcy actually do when you file?

Two mechanisms do almost all the work. First, the moment a petition is filed it operates as a stay of collection activity: lawsuits and administrative actions, enforcement of pre-petition judgments, acts to obtain or control estate property, acts to create or enforce liens, and any act to collect a pre-petition claim (11 U.S.C. § 362(a)). The District of Maryland's court puts it plainly for consumers: while the stay is in effect, creditors cannot bring or continue lawsuits, make wage garnishments, or even make telephone calls demanding payment (Bankr. D. Md. official page — Legal Overview).

Second, at the end of a successful case a discharge voids any judgment determining your personal liability on a discharged debt and operates as an injunction against any further act to collect it (11 U.S.C. § 524(a)). The Middle District of Alabama describes the same thing in ordinary words: a discharge releases you from personal liability for dischargeable debts and prohibits those creditors from contacting you about them.

• The stay begins on filing, without a hearing and without asking a creditor's permission (11 U.S.C. § 362(a)).
• The discharge is the durable relief; the stay is the breathing room while the case runs.
• In Chapter 13, a separate co-debtor stay can also limit collection from an individual who is liable with you on a consumer debt (11 U.S.C. § 1301).

What does bankruptcy not do, no matter how bad things are?

The Bankruptcy Code writes the limits down. Section 523(a) excepts whole categories of debt from discharge, and the official notice courts hand every consumer filer summarizes them: you may still have to pay most taxes, most student loans, domestic support and property settlement obligations, most fines, penalties, forfeitures and criminal restitution, and certain debts you did not list in your papers (U.S. Bankr. Ct. D. Alaska, The Forms Individuals and Married Couples Need to File Bankruptcy).

The stay has its own carve-outs. It does not stop a criminal action or proceeding against you, and it does not stop civil proceedings to establish paternity, to establish or modify a domestic support order, or concerning child custody or visitation (11 U.S.C. § 362(b)). Arizona's court states the practical version: you are not protected by the automatic stay from most domestic relations proceedings or most criminal proceedings.

Why do you still owe on your house or car after a discharge?

This is the distinction people are most often surprised by, and courts flag it repeatedly. A discharge relieves you of the personal obligation to pay. It does not erase a valid lien. The Northern District of Iowa states it directly: the discharge order only relieves the debtor of the personal obligation to pay the debt, and valid liens that existed before filing generally pass through the bankruptcy unaffected, though certain liens may be avoided during the case or satisfied through a plan.

The practical consequence is straightforward. If you want to keep property that secures a debt, the payments generally have to keep being made. Arizona's court is explicit that under both Chapter 7 and Chapter 13 you must pay debts secured by property if you want to keep the property, most commonly the home mortgage, and must keep insurance in place. Middle District of Alabama guidance adds that a creditor holding a lien not eliminated in the case may enforce it against the property after discharge.

• Discharged personally, still collateral: the lender's remedy shifts from suing you to taking the property.
• Some liens can be avoided or handled through a plan rather than surviving untouched (Bankr. N.D. Iowa official page — FAQs: Debtor).
• A reaffirmation agreement makes an otherwise dischargeable debt legally binding again, which courts advise you not to sign without counsel (U.S. Bankr. Ct. M.D. Ala., Consumer Pro Se Debtors Guide).

What changes how much bankruptcy can do for you?

Several written variables move the outcome, and none of them are about how deserving you are. Which chapter you file changes the shape of the relief: Chapter 7 is a liquidation aimed at discharge, while Chapter 13 is a repayment plan that can be used to cure defaults on secured debts including a home mortgage or vehicle (U.S. Bankr. Ct. D. Ariz., Choosing Your Chapter). Chapter 13's discharge is granted only after you complete all plan payments; a Chapter 7 discharge comes after the objection deadline passes.

Eligibility itself is defined by statute, not by feeling: only a person who resides, is domiciled, has a place of business, or has property in the United States may be a debtor, and § 109 sets who may file under which chapter. Prior filings matter too. Arizona's court explains that if a case was dismissed within the past year, the stay in a new case may last only 30 days, and after two dismissals in the prior year the stay may not take effect at all without a court order.

• Chapter choice (7 versus 13) changes whether defaults can be cured over time.
• Timing against a foreclosure sale or a landlord's existing judgment can decide whether the stay helps at all.
• Recent dismissed filings can shorten or eliminate the stay (11 U.S.C. § 362).
• Whether a debt was listed in your papers affects whether it is discharged.

What does federal law say about the stay and the discharge?

The relief is federal and exclusive. Federal courts have exclusive jurisdiction over bankruptcy cases, which means a bankruptcy case cannot be filed in a state court (Bankr. D. Md. official page — Legal Overview). Maryland's court also states the two stated purposes of 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 property is available.

The operative sections are short and worth knowing by name. Section 362(a) creates the stay and § 362(b) lists what it does not reach. Section 524(a) gives the discharge its teeth by voiding judgments of personal liability and imposing an injunction. Section 523(a) is the list of exceptions. Section 541 defines what becomes property of the estate, and § 522 governs the exemptions that determine what you can keep out of the trustee's hands. A creditor who wants the stay lifted must ask the court for relief, and § 361 defines the adequate protection a secured party may be given.

• 11 U.S.C. § 362 — the automatic stay and its statutory exceptions.
• 11 U.S.C. § 524 — the effect of discharge: judgments voided, collection enjoined.
• 11 U.S.C. § 523 — the debts a discharge does not reach.
• 11 U.S.C. § 522 — exemptions; 11 U.S.C. § 541 — property of the estate.

Where do state or local rules change the answer?

The core answer on this page is federal and does not change by state. What does change is what property you keep, because exemptions are drawn from state law and, in some states, only state law. Section 522(b) lets a state decide by statute whether the federal exemption list is available as an alternative; California, for example, has legislated that the federal § 522(d) exemptions are not authorized in that state (Cal. Civ. Proc. Code § 703.130). Exemption amounts and categories belong on the state pages, not here.

Procedure also varies locally. Each district has its own local rules and its own filing practices, and those rules are real requirements rather than formalities. Districts publish their own consumer guides, fee instructions, and amendment procedures. If you want the rules that actually apply to you, start from your own court rather than a general summary.

• Exemptions: state law controls, and some states opt out of the federal list (11 U.S.C. § 522; Cal. Civ. Proc. Code § 703.130).
• Local rules govern filing mechanics, copies, and amendments (S.D. Ga. official local-rule publication — printable version of Local Bankruptcy Rules).
• Whether a state-law deadline has already passed, such as a completed foreclosure sale, can decide the outcome.

What does this look like in practice, start to finish?

A case normally begins with a petition filed in the bankruptcy court, along with statements listing assets, income, liabilities, and every creditor and what they are owed (Bankr. D. Md. official page — Legal Overview). Filing itself triggers the stay. The clerk then notifies creditors that a petition has been filed.

You attend a meeting of creditors, held 21 to 60 days after filing in a Chapter 7 or Chapter 13 case, where you answer questions under oath (Bankr. W.D. Ky. official guidance — Guide to Filing Bankruptcy without an Attorney). In many consumer liquidation cases there is little or no money available to pay creditors, few disputes arise, and a discharge of most debts is entered without objection. Maryland's court says it cannot predict when any individual will receive a discharge, but in a typical Chapter 7 case it could be four to six months after filing the paperwork. Filing costs are set nationally: Chapter 7 is a $245 filing fee plus a $78 administrative fee and a $15 trustee surcharge; Chapter 13 is a $235 filing fee plus a $78 administrative fee.

What documents and information does the process involve?

The paperwork is where most of the risk of losing relief sits, because the Code ties consequences to what you disclose. You file a petition plus statements listing assets, income, liabilities, and the names and addresses of all creditors and the amounts owed (Bankr. D. Md. official page — Legal Overview). A debt neither listed nor scheduled, where you knew the creditor, can be excepted from discharge under § 523(a)(3).

Exemptions are not automatic either. The Southern District of Iowa's instructions are blunt: to exempt property you must list it on Schedule C, and if you do not list it the trustee may sell it and pay the proceeds to creditors. Chapter 7 filers with primarily consumer debts also file a statement of current monthly income comparing that income to the state median, and file a second means-test form if income is above it.

Everything is signed under penalty of perjury, and errors are corrected by filing an amendment, sometimes with a fee.

• Petition, plus schedules of assets, income, liabilities, and all creditors.
• Schedule C to claim exemptions — omitted property may be sold (Bankr. S.D. Iowa official guidance — Instructions - Bankruptcy Forms for Individuals).
• Official Form 122A-1, and Form 122A-2 if income is above the state median.
• Amendments to correct anything inaccurate or missing, signed under penalty of perjury.

What should you ask a lawyer about your own situation?

Court guidance is consistent on one point: the clerk's office is prohibited by law from giving legal advice or helping prepare your forms, so the analysis of your facts has to come from somewhere else. New Hampshire's court says the best way to understand how a filing would affect you is to consult a local attorney about your individual situation. Arizona's court notes that some individuals may need Chapter 11 because their debts are too large for Chapter 13, a judgment call that turns on numbers.

Bring the specific questions, not the general ones. Which of your debts fall inside § 523(a). Whether your equity is covered by the exemptions available where you live. Whether a lien on your property can be avoided or has to be paid. Whether a reaffirmation makes sense, which courts specifically advise discussing with counsel first. Whether a prior dismissed case limits the stay in a new one.

• Which of my debts are excepted from discharge, and why?
• What happens to my home or vehicle lien, and can it be avoided or cured in a plan?
• Do the exemptions where I live cover my equity?
• Does a prior filing shorten or eliminate the automatic stay in my case?
• Should I sign a reaffirmation agreement, or decline it?

Frequently asked questions

Does bankruptcy erase all of my debt?

No. Section 523(a) excepts entire categories from discharge, and courts list the common ones: most taxes, most student loans, domestic support and property settlement obligations, most fines, penalties, forfeitures and criminal restitution, and debts not listed in your papers. A slightly broader discharge is available in Chapter 13 than in Chapter 7, but the exceptions remain substantial.

Will filing stop a wage garnishment?

Filing a petition operates as a stay of the enforcement of a pre-petition judgment and of acts to collect a pre-petition claim, which commonly halts wage garnishment (11 U.S.C. § 362(a)). Maryland's court states that while the stay is in effect creditors cannot bring or continue lawsuits, make wage garnishments, or make collection calls. Statutory exceptions in § 362(b) still apply.

Can bankruptcy stop a child support case?

No. The filing does not operate as a stay of civil proceedings to establish paternity, to establish or modify a domestic support order, or concerning child custody or visitation (11 U.S.C. § 362(b)). Domestic support obligations are also among the debts a discharge does not reach. Arizona's court states plainly that you are not protected by the stay from most domestic relations proceedings.

Does a discharge get rid of my mortgage?

A discharge relieves you of personal liability, but valid liens that existed before filing generally pass through the bankruptcy unaffected (Bankr. N.D. Iowa official page — FAQs: Debtor). Practically, that means a lender can still foreclose if payments are not maintained. Some liens may be avoided during the case or satisfied through a Chapter 13 plan, which is a fact-specific question for a lawyer.

What does it cost to file?

Court fees are set nationally. Chapter 7 is a $245 filing fee plus a $78 administrative fee and a $15 trustee surcharge. Chapter 13 is a $235 filing fee plus a $78 administrative fee. The statute permits installment payment for an individual commencing a voluntary or joint case; a Chapter 7 waiver is conditional under 28 U.S.C. § 1930(f). Attorney fees are separate.

How long until a discharge is entered?

It depends on the chapter and your case. Maryland's court says it cannot predict when any individual will receive a discharge, but in a typical Chapter 7 case it could be four to six months after filing the paperwork. In Chapter 13, the discharge is granted only after you complete all payments called for by your plan (U.S. Bankr. Ct. D. Ariz., Choosing Your Chapter).

Does bankruptcy stop a criminal case or restitution?

No. The filing does not operate as a stay of the commencement or continuation of a criminal action or proceeding against the debtor (11 U.S.C. § 362(b)(1)). Criminal restitution obligations are also among the debts courts list as ones you may still be required to pay after a discharge. Arizona's court states you are not protected by the stay from most criminal proceedings.

What if my case gets dismissed instead of discharged?

Dismissal ends the case without the relief. On dismissal the automatic stay ends, allowing creditors to begin collecting debts that were not discharged, and an order of dismissal by itself does not free you 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, such as failing to appear at the creditors' meeting.

Sources

• 11 U.S.C. § 362 — Automatic stay · official source
• 11 U.S.C. § 524 — Effect of discharge · official source
• 11 U.S.C. § 523 — Exceptions to discharge · official source
• 11 U.S.C. § 522 — Exemptions · official source
• 11 U.S.C. § 541 — Property of the estate · official source
• 11 U.S.C. § 109 — Who may be a debtor · official source
• 11 U.S.C. § 1301 — Stay of action against codebtor · official source
• 11 U.S.C. § 361 — Adequate protection · official source
• Bankr. D. Md. official page — Legal Overview
• U.S. Bankr. Ct. D. Ariz., Choosing Your Chapter: What can Bankruptcy do for you? What will it do to you?
• U.S. Bankr. Ct. M.D. Ala., Consumer Pro Se Debtors Guide
• Bankr. N.D. Iowa official page — FAQs: Debtor
• Bankr. S.D. Iowa official guidance — Instructions - Bankruptcy Forms for Individuals
• Bankr. W.D. Ky. official guidance — Guide to Filing Bankruptcy without an Attorney
• U.S. Bankr. Ct. D. Alaska, The Forms Individuals and Married Couples Need to File Bankruptcy
• Pro Se Debtor Guide
• Cal. Civ. Proc. Code § 703.130
• S.D. Ga. official local-rule publication — printable version of Local Bankruptcy Rules
• 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

• Which debts get discharged
• The automatic stay
• Exemptions: what they protect
• Chapter 7
• Chapter 13
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