Before filing, make sure you know how bankruptcy can affect the next chapter of your life.

If you feel like it’s impossible to dig yourself out of credit card or other debt, filing for bankruptcy may seem like your only hope to eliminate debt and make a fresh start. However, filing for bankruptcy carries a hefty price tag when it comes to your credit rating.

That’s because a bankruptcy judgment – which can stay on your credit report for up to 10 years – has an adverse effect on your credit score. Filing for bankruptcy shouldn’t be your first option, but if you must file, it pays to know how bankruptcy could affect your life.

Find out 10 things to know before filing for personal bankruptcy below.

1. Know the differences between chapter 7 and chapter 13

Individuals typically file either chapter 7 or chapter 13, two very different types of bankruptcy. Chapter 7 is a “liquidation” bankruptcy where most of your property is sold and used to pay off your debts and other debts are discharged so you never have to repay them.

A chapter 13 bankruptcy protects secured assets such as your house from being sold when you file, stops collections and allows you to reorganize your debts and make payments for a period of three or five years. If you catch up on back payment during the repayment period, you will be able to keep your assets.

Find out: How to Choose the Right Path for a Personal Bankruptcy Filing

2. You must be eligible to file

Before you’re allowed to proceed with chapter 7 bankruptcy, you must first pass what’s known as a “means test”, an analysis of your finances conducted by an independent trustee after you file to determine whether you qualify for bankruptcy.

The means test includes an analysis of the last six months of your income and also your financial history for indicators of potential bankruptcy abuse such as maxing out all your credit cards the week before you file or taking out an excessive amount in payday loans or cash advances within 90 days of filing.

Find out: When Should I File for Bankruptcy and Do I Qualify?

3. You must seek credit counseling before filing

Except under certain emergency circumstances, you aren’t eligible to file bankruptcy unless you’ve received credit counseling within 180 days before filing, according to You must also complete a debtor education course before your debts can be discharged.

However, you must obtain free or nominal-fee credit counseling or take a debt education course only credit counseling agencies and debt education providers that have been approved by the U.S. Trustee Program.

4. Consider hiring an attorney

You can file for bankruptcy “pro se” without an attorney, but you’re probably better off if you hire a bankruptcy attorney to file. For one thing, an attorney can explain the difference between filing for chapter 7 or chapter 13 bankruptcy and help you determine which option is best.

Hiring a bankruptcy attorney also helps ensure that you’re not unwittingly leaving out property and assets, failing to submit all forms or committing costly or even fraudulent errors.

5. You must pay to file

If you’re in financial straits, the last thing you need is one more bill to pay. No matter how broke you are, however, filing bankruptcy isn’t free. For starters, the federal bankruptcy filing fee is $350.

Additional costs could include attorney fees, federal miscellaneous and administrative fees and fees for required credit counseling and the debtor education course you must take before your debts can be discharged.

6. Bankruptcy won’t wipe out certain debts

Both chapter 7 and chapter 13 bankruptcy can help eliminate unsecured debts such as credit cards stop repossession, foreclosure, utility shut-offs and wage garnishments, according to Experian. However, chapter 7 bankruptcy can’t eliminate court-ordered alimony or child support, tax debts and student loans.

Find out: The Pros and Cons of Filing Bankruptcy

7. Bankruptcy stays on your credit report for years

When you file bankruptcy, the information stays on your credit report for either seven years for chapter 13 or ten years if you file chapter 7, according to major credit bureau Experian.

As long as a bankruptcy appears on your credit report, it negatively affects your score. The good news is that a bankruptcy won’t stain your credit forever, since the bankruptcy judgment automatically drops off your credit report either seven or ten years from the filing date.

Find out: What Happens to Your Credit Score After Bankruptcy?

8. The bankruptcy process isn’t quick

Even though you’re eager to put your debts behind you and move on, filing chapter 7 bankruptcy can take anywhere from four months to a year to complete. A chapter 13 filing takes longer – three to five years – since the court sets up a repayment plan so your creditor can recoup some money before debts are discharged.

How long it takes to complete the bankruptcy process depends on the number of assets you must liquidate, how easily you pass the means test and other specific details of your case.

9. Your bankruptcy will become public record

When you file bankruptcy, the case becomes a public record. That means the judgment shows up in bankruptcy court databases and on your credit report and is readily available to the public. Potential employers who perform a background check (with your permission) will also see information about the bankruptcy, which will show up on any background check.

10. Your financial secrets also become public record

In addition to filing the chapter 7 bankruptcy petition, you must also file schedules of assets and liabilities, a schedule of current income and expenses, a statement of your financial affairs and a schedule of executory contracts and unexpired leases, according to

So if someone you’re dating or a gossipy coworker wants to know how much credit card debt you have, which loans you defaulted on and all about other debts, that person can easily look up the details for free at the federal courthouse in the proper jurisdiction or online for a fee.

Start the filing process, so you can get the fresh start you need.

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About the Author

Deb Hipp

Deb Hipp

Deb Hipp is a full-time freelance writer based in Kansas City, Mo. Deb went from being unable to get approved for a credit card or loan 20 years ago to having excellent credit today and becoming a homeowner. Deb learned her lessons about money the hard way. Now she wants to share them to help you pay down debt, fix your credit and quit being broke all the time. Deb's personal finance and credit articles have been published at Credit Karma and The Huffington Post.

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