What happens when you file bankruptcy?

Bankruptcy isn’t something most of us want to consider, even when we’ve dug ourselves into a significant financial hole. But in some circumstances, bankruptcy can provide the financial protection and relief we need.

Perhaps the most difficult part of bankruptcy is determining whether it’s the best option for your financial situation. Talking to a financial professional like a credit counselor or a bankruptcy attorney can be a helpful if not necessary step in making that determination. More on that in a bit. First, let’s review what happens when you file for bankruptcy protection:

You’ll complete, sign & file your bankruptcy paperwork

You and your attorney will have already reviewed your financial accounts to determine what needs to be included in your filing. You will also have reviewed whether you may qualify for Chapter 7 bankruptcy protection, which allows for your debts to be dismissed completely. If you don’t qualify, you’ll likely file for Chapter 13 protection, which requires a payment plan. Chapter 11 is also available, but is typically used by businesses and consumers with large sums of debt.

When you file, the court will review your paperwork, determine if anything else is needed and then turn your case over to a trustee (in the case of Chapter 11 or Chapter 13) who will oversee your case until your payment plan is finalized.

Your creditors must stop contacting you immediately

One of the most helpful benefits of filing for bankruptcy protection is that the constant barrage of phone calls and letters from your creditors must stop.

Your credit accounts will be closed

All of the accounts included in your bankruptcy filing will be closed and, in some cases, accounts not included will be closed when those creditors learn of your bankruptcy.

If you filed for Chapter 7 protection

Your accounts will be forgiven in full and your case will be resolved within 90 days from the time you file. You may begin applying for new credit after that 90 days, but you may not qualify right away. Many creditors won’t want to extend credit to someone with a recent bankruptcy on their credit reports. Your bankruptcy will remain on your credit reports for 10 years from the date you filed.

If you filed for Chapter 11 or 13 protection

You will begin making payments to your trustee that will be distributed to your creditors. This payment plan typically lasts from three to five years depending on the amount of your debts. Your bankruptcy will remain on your credit reports for seven years from the date you filed.

Discharging your bankruptcy

Once you’ve made all the scheduled payments in your payment plan under Chapter 11 or Chapter 13, the court will discharge your case. This means you’ve successfully completed the bankruptcy and it will begin to weigh less and less heavily on your credit scores. At this time you may qualify for new credit accounts, though you likely will not receive the best terms available until after your bankruptcy is removed from your credit reports.

What happens if your bankruptcy case is dismissed

Should you stop making payments on your Chapter 11 or Chapter 13 payment plan, you are likely to lose your bankruptcy protection. The trustee will notify the court of your missed payments and your case could be dismissed. If this happens, your creditors have the ability to seek payment for the full amount of your debts and can even sue you.

Of course, if your financial situation has changed significantly and you are unable to make those payments, it is possible for you to file for Chapter 7 protection, at which time your debts will be dismissed.

The bottom line

If you’d like to consider all of your debt relief options, Resolve is here to help. We can assess your situation and show you your options for paying off your debt, including filing bankruptcy, if appropriate. Our Resolve platform and debt guidance are free. You can review and compare debt relief paths and ask our experts questions without cost. If you then choose to work with one of our Resolve Network Partners, we would inform you of the fee for their service.  

While we currently do not offer partnerships with bankruptcy attorneys, we can connect you with licensed professionals in your state that offer a no-cost initial consult. We can also help you understand what bankruptcy would mean for your financial circumstances.

Your first step is to complete your profile here. We’re also happy to speak with you to discuss your situation further. Just send us a message.

Share on facebook
Share on twitter
Share on linkedin

A great place to start

Quickly compare your options to get out of debt


We use bank-level security with 2048-bit SSL encryption and will never share your info without your consent


HelloResolve, Inc. is an accredited company with the Better Business Bureau​


We were selected as a winner of the prestigious CFSI Financial Solutions Lab by J.P. Morgan Chase

Copyright © 2019 Resolve Innovations, Inc., a Public Benefit Corporation. All rights reserved.