Jul 8, 2025
The Complete Guide to Bankruptcy in 2025
What Bankruptcy Is and Why It Matters
Bankruptcy is a legal process designed to help individuals overwhelmed by debt find relief and a path to financial stability. Whether you're facing mounting medical bills, credit card debt, or unemployment, filing for bankruptcy may offer a fresh start.
There are two main types of personal bankruptcy:
Chapter 7 Bankruptcy: A faster, liquidation-based process for those with little to no disposable income.
Chapter 13 Bankruptcy: A court-approved repayment plan for those who can repay a portion of their debts over 3-5 years.
Who Should Consider Bankruptcy
You may benefit from filing for bankruptcy if:
You’re unable to keep up with the minimum debt payments
You’re facing lawsuits, wage garnishment, or foreclosure
You have more debt than you can reasonably repay in 5 years
Bankruptcy isn't a decision to make lightly, but for many, it can be a necessary lifeline.
To make sure you’re fully prepared, revisit the Ultimate Bankruptcy Filing Checklist before you begin your paperwork.
Step-by-Step: How to File for Bankruptcy
Step 1: Understand Your Bankruptcy Options
Choosing between Chapter 7 and Chapter 13 depends on your income, assets, and financial goals.
Use our AI Bankruptcy Advisor to determine which option best suits your situation quickly.
Step 2: Determine Eligibility
Who qualifies for Chapter 7? Your income must fall below your state’s median, or you must pass a means test.
Who qualifies for Chapter 13? You must have regular income and meet debt limit thresholds.
Step 3: Gather Your Financial Information
Prepare:
Income documents
Tax returns
Asset and debt lists
Monthly expenses
Step 4: Complete the Bankruptcy Form
You’ll need to fill out federal bankruptcy forms that detail your financial situation. These forms can be complex, especially if you’re filing bankruptcy without a lawyer.
Step 5: Review Your AI Bankruptcy Advisor Report
After completing the form, our AI Bankruptcy Advisor provides a tailored analysis:
Best-fit bankruptcy type
What assets are protected
Likely outcome scenarios
Steps to protect your car, house, or other key assets
Step 6: File with or without a Lawyer
Many people ask: "Can I file for bankruptcy without a lawyer?"
Yes - but it’s critical to understand the risks. Our AI tool helps bridge the gap by making the process more transparent and personalized.
Common Mistakes and Frequently Asked Questions
Common Mistakes
Waiting too long to file
Hiding assets or income
Choosing the wrong bankruptcy chapter
Filing without understanding the consequences
FAQs
Can I keep my house if I file for bankruptcy?
Yes, depending on your equity and the exemptions in your state.
What happens to my car in Chapter 7 bankruptcy?
You may be able to keep it if it falls within exemption limits or you reaffirm the loan.
How long does bankruptcy stay on your credit report?
Chapter 7: 10 years
Chapter 13: 7 years
Is bankruptcy better than debt settlement?
Bankruptcy can offer legal protection and a fresh start, while debt settlement can leave lingering tax and credit issues unresolved.
What debts are discharged in Chapter 7?
Most unsecured debts, including credit cards, medical bills, and personal loans.
Why Our AI Bankruptcy Advisor Saves You Time
Our proprietary AI Bankruptcy Advisor helps you:
Avoid costly legal missteps
Understand your unique bankruptcy options
Get answers in plain language
Save hours of research
By analyzing your form data, it delivers a clear summary of your situation, including next steps.
Final Takeaways and Additional Resources
Bankruptcy can offer real debt relief if done correctly
Understand the pros and cons of Chapter 7 vs. Chapter 13
Use the AI Bankruptcy Advisor to gain clarity fast
Consult a bankruptcy lawyer if your case is complex
Additional Resources:
Bankruptcy means test calculator
Credit score recovery timeline post-bankruptcy
Alternatives to bankruptcy
If you’re unsure about your next move, start with our AI Bankruptcy Advisor - it’s fast, private, and built to give you peace of mind.