How Can You Declare Yourself Bankrupt? A Real Talk Guide to Starting Over

Declaring bankruptcy means you’re officially telling the court, “I can’t pay my debts, and I need help.” It’s a legal process that either wipes out most of your debts (Chapter 7) or reorganizes them into a payment plan you can actually afford (Chapter 13).

Think of it like this: Chapter 7 is the express lane—quick, straightforward, and most debts disappear in 3-6 months. Chapter 13 is the slower route—you keep more of your stuff, but you’re paying back what you can over 3-5 years.

Who Can Actually Declare Bankruptcy?

Here’s the good news: almost anyone can file for bankruptcy. You don’t need permission from your creditors, and you don’t need to prove you’re “broke enough.”

For Chapter 7, there’s something called the means test. Basically, the court compares your income to your state’s median income. If you’re below that line, you’re golden. If you’re above it, they’ll calculate whether you have enough leftover cash after expenses to pay your debts. Don’t stress too much about this—about two-thirds of filers qualify.

For Chapter 13, there’s no means test. But there are debt limits (around $2.75 million total as of 2025). If you’re over that, you might need to look at Chapter 11, which is basically bankruptcy for businesses and really wealthy folks.

One more thing: you’ll need to complete a credit counseling course within 180 days before filing. It’s usually online, takes about an hour, and costs around $10-50. Think of it as the warm-up before the main event.

The Real Cost of Filing Bankruptcy

Let’s talk money, because ironically, it costs money to declare you don’t have money.

Filing fees:

• Chapter 7: $338
• Chapter 13: $313

If you literally cannot afford the filing fee for Chapter 7, you can apply for a fee waiver or ask to pay in installments. The court gets it—you’re broke. That’s why you’re here.

Attorney fees are the bigger question. While you can file without a lawyer (called filing “pro se”), most people hire one. Chapter 7 attorneys typically charge $1,000-$3,500, while Chapter 13 runs $3,000-$6,000 or more.

Is it worth it? Usually, yes. Bankruptcy law is complicated, and one mistake can get your case dismissed or cost you assets you could’ve protected. Many attorneys offer payment plans, knowing you wouldn’t be filing bankruptcy if you had cash lying around.

Can You Declare Bankruptcy Without Losing Everything?

This is the fear that keeps people up at night. The short answer: probably not.

Every state has bankruptcy exemptions—basically, a list of stuff you get to keep. These typically include:

• Your primary residence (up to a certain equity amount)
• One vehicle (up to a certain value)
• Household goods and clothing
• Retirement accounts
• Tools you need for work

In Chapter 7, anything that’s not exempt can be sold by the trustee to pay your creditors. But here’s the secret: most Chapter 7 cases are “no-asset” cases, meaning you don’t have anything valuable enough (beyond exemptions) for the trustee to bother selling.

In Chapter 13, you keep all your stuff, but your repayment plan has to pay creditors at least as much as they would’ve gotten in Chapter 7. It’s a trade-off: keep your things, but pay something back.

If keeping your home is your priority, Chapter 13 is often the better choice. It lets you catch up on mortgage payments over 3-5 years while stopping foreclosure in its tracks.

Step-by-Step: How to Declare Bankruptcy Yourself

Alright, here’s the actual process. Buckle up—it’s bureaucratic, but doable.

Step 1: Complete Credit Counseling

Before you can file anything, you need that credit counseling certificate. Go to the U.S. Trustee’s website, find an approved agency, and knock out the course. Save that certificate—you’ll need it.

Step 2: Take the Means Test (for Chapter 7)

Calculate your average monthly income for the past six months. Compare it to your state’s median. If you’re below it, you pass. If not, fill out the full means test form to see if you still qualify. The form is tedious but straightforward—mostly just listing your income and expenses.

Step 3: Gather Your Financial Documents

You’ll need six months of:

• Pay stubs
• Bank statements
• Tax returns (last 2 years)

Plus:

• A list of all your debts (creditor names, addresses, amounts)
• A list of all your assets (car, house, jewelry, investments)
• Monthly living expenses

This part sucks. It just does. But you need to be thorough and honest. Lying on bankruptcy forms is fraud, and that’s a federal crime.

Step 4: Fill Out the Bankruptcy Forms

There are about 20 different forms, depending on your situation. The main ones are:

• Voluntary Petition: Basic info about you
• Schedules A-J: Lists of your assets, debts, income, and expenses
• Statement of Financial Affairs: Recent financial history
• Statement of Intentions: What you plan to do with secured debts (car loans, mortgages)

These forms are available free on the U.S. Courts website. If you’re using an attorney, they’ll handle this part.

Step 5: File Your Petition

Take your completed forms, your credit counseling certificate, and your filing fee to your local bankruptcy court. You can file in person or electronically (if you’re registered with the court’s e-filing system).

The moment you file, the automatic stay kicks in. This is the magic moment. Collection calls stop. Wage garnishments stop. Foreclosures and repossessions stop. Lawsuits stop. It’s like a force field goes up around you.

Step 6: Attend the 341 Meeting of Creditors

About a month after filing, you’ll attend this meeting. Don’t let the name freak you out—creditors almost never show up. It’s just you, the trustee, and maybe a handful of other people waiting their turn.

The trustee will verify your identity, ask about your forms, and confirm you understand the process. It takes 10-15 minutes. No judge. No drama. Just bring your ID and Social Security card.

Step 7: Complete Debtor Education

After the 341 meeting, you need to take a second course—debtor education. It’s similar to the first one: online, about two hours, costs $10-50. This one teaches you how to manage money and avoid ending up back in debt.

Step 8: Wait for Your Discharge

In Chapter 7, you’ll get your discharge order about 60-90 days after the 341 meeting. In Chapter 13, you’ll receive it after completing your 3-5 year payment plan.

The discharge is your finish line. Most of your debts are legally wiped out. Creditors can’t contact you about them ever again.

What Debts Can You Actually Wipe Out?

Bankruptcy erases most unsecured debts, including:

• Credit card balances
• Medical bills
• Personal loans
• Utility bills
• Past-due rent

But some debts are stubborn. Bankruptcy usually can’t eliminate:

• Child support and alimony
• Most tax debts (unless they’re old enough)
• Student loans (unless you prove “undue hardship,” which is super rare)
• Court fines and criminal restitution
• Debts from fraud or malicious injury

If you’re buried in student loan debt, bankruptcy probably won’t help much. There are other options, like income-driven repayment plans, that might work better.

Will Bankruptcy Destroy Your Credit Forever?

Not even close. Will it ding your credit? Absolutely. But “forever” is dramatic.

Chapter 7 stays on your credit report for 10 years. Chapter 13 stays for 7 years. But here’s what the credit bureaus don’t advertise: your credit score can start recovering within 6-12 months.

How? By getting secured credit cards, becoming an authorized user on someone else’s card, or taking out small credit-builder loans. Pay everything on time. Keep balances low. Within a couple of years, you can have a decent credit score again.

Plus, if your credit was already trashed from missed payments and collections, bankruptcy might actually improve things by wiping the slate clean.

Chapter 7 vs. Chapter 13: Which One Should You File?

Still confused about which chapter to choose? Here’s a cheat sheet:

If you’re behind on your mortgage or car payment and want to keep them, Chapter 13 is your friend. It lets you spread out those missed payments over the life of your plan while the automatic stay protects you.

If you don’t own much, rent your home, and just want a quick reset, Chapter 7 is faster and simpler.

Can Seniors Declare Bankruptcy?

Absolutely. In fact, bankruptcy rates among people 65 and older have tripled in recent decades. Medical bills, credit card debt, and fixed incomes are a brutal combination.

The good news: Social Security income is protected. The bankruptcy court can’t touch it, and neither can your creditors. Same goes for most pensions.

Many seniors qualify for Chapter 7 because their income is low. And since they often don’t own much beyond an exempt home and car, they usually don’t lose any assets.

What If You’re Self-Employed?

Self-employed folks and gig workers can absolutely file bankruptcy. It’s just a bit trickier because your income fluctuates.

For the means test, you’ll average your income from the past six months. If you had a good month followed by three slow ones, that average might work in your favor.

One heads-up: if you’re a sole proprietor (not an LLC or corporation), your business debts are your personal debts. Bankruptcy will discharge them, but it might also impact your ability to keep working if you lose business assets.

If you’re carrying business debt, you might want to explore debt consolidation options before going the bankruptcy route.

What About Divorce-Related Debts?

This gets messy. Debts you owe directly to creditors (even if they were part of the divorce) can be discharged. But debts you owe to your ex-spouse—like property settlement obligations—usually can’t be wiped out in Chapter 7. They can, however, be discharged in Chapter 13 if they’re not support-related.

Child support and alimony? Those never go away in bankruptcy. Ever.

The Automatic Stay: Your Instant Protection

The automatic stay is the most powerful part of bankruptcy, and it happens the second you file.

Picture this: you’re two weeks from foreclosure. Your wages are being garnished. You’ve got three collection lawsuits pending. Then you file bankruptcy, and—boom—everything stops.

The automatic stay is a federal court order that immediately halts:

• Foreclosure sales
• Wage garnishments
• Repossessions
• Collection lawsuits
• Harassing phone calls
• Utility shutoffs

There are exceptions (like criminal proceedings), but for most debt collection, the stay is absolute. Violating it can get creditors in serious legal trouble.

Common Bankruptcy Mistakes to Avoid

Let’s talk about the screw-ups that can tank your case:

1. Lying or hiding assets
   Some people think they’re clever by “forgetting” to list their new TV or transferring their car to their cousin before filing. Don’t. The trustee will find out, and you’ll lose your discharge—or worse, face fraud charges.
2. Racking up new debt right before filing
   If you max out credit cards or take out loans within 90 days of filing, those creditors can challenge the discharge. The court might assume you never intended to pay them back.
3. Paying back family or friends
   If you pay your brother the $5,000 you owe him right before filing, the trustee can claw that money back and redistribute it to all creditors. Seems unfair, but that’s the law.
4. Not listing all your debts
   If you forget to list a debt, it probably won’t get discharged. List everything, even debts you’re not sure about.
5. Missing the 341 meeting
   This isn’t optional. If you don’t show up, your case gets dismissed.

Alternatives to Bankruptcy

Bankruptcy isn’t always the answer. Before you file, consider:

• Debt consolidation: Combine multiple debts into one loan with a lower interest rate. Check out nonprofit debt consolidation programs.
• Debt settlement: Negotiate with creditors to pay a lump sum that’s less than you owe. This tanks your credit too, but not as severely as bankruptcy.
• Credit counseling: Work with a free credit counseling service to create a debt management plan.
• Budgeting and side hustles: Sometimes cutting expenses and increasing income can help you avoid debt without filing bankruptcy.

That said, if you’re facing foreclosure, wage garnishment, or lawsuits, bankruptcy’s automatic stay might be the only thing fast enough to help.

Life After Bankruptcy

Bankruptcy isn’t a scarlet letter. It’s a tool. And once you get your discharge, life starts to look different.

You’ll breathe easier without collection calls. You’ll have more money in your paycheck. You can start saving for emergencies instead of just treading water.

Your credit will rebuild. You’ll learn better financial habits (that debtor education course actually helps). And within a few years, you’ll be back on your feet.

Some people even buy houses 2-3 years after bankruptcy. FHA loans allow it if you’ve re-built your credit and stayed current on everything since your discharge.

The Bottom Line

Declaring bankruptcy is a big decision, but it’s not the end of the world. It’s a legal process designed to give people a second chance when debt becomes unmanageable.

If you’re drowning in bills, dodging calls, and losing sleep over money, bankruptcy might be the solution you need. Sure, it costs something, and it’ll ding your credit for a while. But compared to years of struggling with debt you can’t pay, it’s often worth it.

Start by getting that credit counseling certificate. Talk to a bankruptcy attorney (most offer free consultations). And remember: this is a tool, not a failure. You’re taking control of your financial future, and that takes guts.

Ready to take the next step? Don’t wait until you’re drowning. Explore your options, ask questions, and make the choice that’s right for you. Your fresh start is waiting.

Looking for more financial guidance? Check out more resources and expert advice at Wealthopedia.