Types of consumer bankruptcy

The two main kinds of consumer bankruptcy

In the United States, most personal bankruptcy cases are filed under Chapter 7 or Chapter 13. Both can give people breathing room from collection pressure, but they solve debt problems in different ways.

Chapter 7 is often called a liquidation bankruptcy. In many cases, people who qualify can erase some unsecured debts, such as credit card balances and medical bills, without making monthly payments to a Chapter 13 plan. Learn more about Chapter 7.

Chapter 13 is a repayment plan. Instead of asking the court to erase debt right away, you propose a plan to pay some or all of certain debts over time, usually three to five years. Learn more about Chapter 13.

Neither chapter erases every kind of debt. Some debts usually survive bankruptcy, including most student loans, recent income taxes, child support and alimony, most court fines, and debts tied to fraud. Outcomes depend on the facts of the case and the law in your state and district.

How Chapter 7 usually works

Chapter 7 is designed for people who cannot realistically repay their debts. Eligibility often depends on the means test, which looks at income and other factors. The rules are technical, and they vary by state and judicial district, so this is something to review with a licensed bankruptcy attorney in your area.

A Chapter 7 case may help with unsecured debts like credit cards, personal loans, payday loans, old utility bills, and medical debt. But it does not mean a person loses everything. Many people keep their everyday property because bankruptcy exemptions protect certain things, and exemption rules vary a lot by state.

If a case is filed, the automatic stay usually pauses most collection activity right away. That can include wage garnishments, collection calls, lawsuits, and many foreclosure actions. But there are limits and exceptions, especially if there have been prior filings or certain kinds of debts are involved.

Chapter 7 can be faster than Chapter 13, but not everyone qualifies, and it is not right for every problem. For example, if you are behind on a mortgage or car loan and need time to catch up, Chapter 13 may be the better tool.

How Chapter 13 usually works

Chapter 13 is often used by people who have regular income and need time to catch up on important bills. It can be especially helpful if you are behind on a mortgage, facing foreclosure, or trying to stop a car repossession while keeping the property.

In Chapter 13, you propose a court-approved repayment plan, usually lasting three to five years. During that time, you make plan payments based on your income, expenses, debts, and the law that applies in your district. Some debts may be paid in full, some in part, and some may still remain after the case, depending on the type of debt and your specific facts.

Like Chapter 7, filing Chapter 13 usually triggers the automatic stay, which can pause many collection actions. Many people use Chapter 13 to stop a foreclosure sale and catch up over time, but the details matter, and timing can be very important.

Chapter 13 is more complex than many people expect. It can offer powerful protection, but it also requires a budget and steady payments for years. A licensed bankruptcy attorney can explain whether the plan seems realistic in your situation.

How people often choose between them

The choice between Chapter 7 and Chapter 13 usually depends on a few big questions: Do you qualify for Chapter 7? Are you trying to keep a home or car you are behind on? Do you have income to support a repayment plan? Are your debts mostly unsecured, or do you also owe priority debts such as taxes or support?

Here is a simple way to think about it:

• Chapter 7 is often considered when a person has low enough income to qualify and needs a faster way to deal with unsecured debt.
• Chapter 13 is often considered when a person has regular income and needs time to catch up on a mortgage, car loan, or other debts that cannot be handled well in Chapter 7.
• Both chapters are shaped by state exemption laws, local court practice, and the person's full financial picture.

This is general educational information only, not legal, tax, or financial advice. CleanSlate Match is a free matching service, not a law firm and not your lawyer. We help connect people with a licensed bankruptcy attorney near them, but we do not file bankruptcy cases or create an attorney-client relationship.

What bankruptcy can and cannot do

Bankruptcy can be a real fresh start for some people, but it is important to be honest about its limits. It may help stop collection pressure, pause most garnishments and lawsuits, and address many unsecured debts. In the right case, it may also help a person keep a home or car through exemptions or a Chapter 13 repayment plan.

But bankruptcy is not a promise that every debt will disappear. Some debts usually are not discharged, including most student loans, recent income taxes, child support, alimony, most criminal or court fines, and debts from fraud or certain intentional acts. Whether a debt can be discharged depends on the law and the facts.

Because the stakes are high, it is wise to speak with a licensed bankruptcy attorney and confirm that the lawyer is in good standing with the state bar where they practice. A careful attorney can explain your options, costs, risks, and likely next steps in plain language.

Cost, and how CleanSlate Match can help

Many consumer bankruptcy attorneys charge a flat fee for their work, plus the court filing fee and a small required credit-counseling fee. These are ranges, not quotes, and the real number depends on the chapter, the complexity of the case, and the court district.

For Chapter 7, attorney flat fees often fall roughly in the $1,000 to $2,500 range, plus a court filing fee that is usually a few hundred dollars and a small credit-counseling fee. For Chapter 13, attorney flat fees often fall roughly in the $3,000 to $6,500 range, sometimes with part paid before filing and part through the plan, plus the court filing fee and the counseling fee. Local practice varies, and some cases cost more.

Things that can raise or lower cost include whether you own a home, have a business, have recent transfers of property, face lawsuits, owe taxes, have many creditors, or need urgent action to stop foreclosure or garnishment. The best way to get a real quote is to speak directly with a licensed attorney in your area.

CleanSlate Match is free for you to use. We are not a law firm, and we do not give legal advice. We only collect basic contact information and general intent, such as your name, phone number, optional email, state, preferred language, and a general sense of your situation. We do not ask for Social Security numbers, bank-account numbers, credit-card numbers, or other financial-account details. When you're ready, you can get matched with a licensed bankruptcy attorney near you.