Should I File for Bankruptcy? A Step-by-Step Decision Guide

It helps to know where you stand. Ask yourself: 

• How much do I owe, and to whom? 
• What are my monthly income and expenses? 
• Do I have debt that is with a collection agency or about to be sent to one? 
• Am I at risk of being sued over my debt or having money taken from my wages or bank account to go toward a debt?

If you're behind on payments or getting calls from debt collectors, go here to learn more about dealing with debt, including your options when you're behind on payments, have debt in collections, or are being sued or garnished over a debt. 

Before filing for bankruptcy, consider whether other solutions might work for you. Some people can: 

• Negotiate a lower payment plan with creditors. 
• Work with a nonprofit credit counseling agency to create a debt management plan. 
• Consolidate debt into a single, manageable loan. 
• Do nothing if they are collection proof, meaning creditors cannot take their income or assets. 

Go here to learn more about debt relief options in addition to bankruptcy.

Before deciding whether bankruptcy is right for you, it's important to understand what it can and cannot do.  

• Bankruptcy can erase certain debts and stop some debt collection, but it does not eliminate all debts or guarantee that you can keep all your belongings or property.
• Knowing these limits can help you set realistic expectations and decide if bankruptcy is the best path for your financial situation.

Go here to learn the basics about what bankruptcy can and can't do, how it works, and what to think about before filing.

There are two main types of personal bankruptcy:  

• Chapter 7 bankruptcy erases most debts quickly, but you may have to give up some property. 
• Chapter 13 bankruptcy lets you keep your property and follow a payment plan for 3 to 5 years to catch up on debts.

Which type is best for you depends on your income, assets, and financial goals. 

Go here to learn more about whether Chapter 7 and Chapter 13 make sense for you.

Worried about keeping your home, car, or other belongings if you file for bankruptcy? 

Go here to learn what bankruptcy means for your property and how Chapter 7 and Chapter 13 offer different protections for what you can keep. 

The bankruptcy process might feel overwhelming, but breaking it into smaller steps can help. Some of the things you will need to do: 

• Take a credit counseling course from an approved provider.
• Gather and submit all the financial documents the court needs.
• File your paperwork and attend any required meetings and court hearings.
• Complete a debtor education course before the case ends.

Go here to learn about filing for bankruptcy from start to finish.

A bankruptcy stays on your credit report for up to 10 years, but many people start rebuilding their finances right away. You can take steps to improve your financial situation, including: 

• Making on-time payments for rent, utilities, and any remaining debts.
• Use a secured credit card to rebuild credit.
• Check your credit report to make sure the debts you eliminated are correctly reported.

Bankruptcy does not mean you can never get credit again. Many people go on to rent homes, qualify for mortgages, and improve their financial health. 

Go here to learn about what to expect and how to rebuild after bankruptcy.