Bankruptcy Court: Filing, Automatic Stay, and Discharge

Here is how bankruptcy court works: you file a petition in a federal bankruptcy court, a trustee examines your finances at a meeting of creditors, and a judge either discharges your eligible debts or dismisses the case. Bankruptcy is handled only by federal courts, so the process is the same whether you file in Maine or Montana. The U.S. District Courts have exclusive jurisdiction over bankruptcy matters and refer the day-to-day work to the bankruptcy judges within each district.1Office of the Law Revision Counsel. 28 USC 1334 – Bankruptcy Cases and Proceedings

Who Runs a Bankruptcy Case

A bankruptcy judge rules on everything from creditor disputes to repayment plan approvals to the final discharge order. Bankruptcy judges are appointed by the U.S. Court of Appeals for their circuit and serve 14-year terms, which is different from the lifetime appointments that Article III federal judges hold.2Office of the Law Revision Counsel. 28 USC 152 – Appointment of Bankruptcy Judges The Clerk of Court handles filings and the official record.

The U.S. Trustee Program, part of the Department of Justice, supervises the system and the private trustees who are assigned to individual cases.3U.S. Department of Justice. U.S. Trustee Program Alabama and North Carolina use bankruptcy administrators instead of U.S. Trustees.4United States Courts. Trustees and Administrators

The trustee you’ll actually deal with depends on the chapter. A Chapter 7 trustee collects and sells your non-exempt assets, investigates your finances, and distributes the proceeds to creditors in the order the statute requires.5Office of the Law Revision Counsel. 11 USC 704 – Duties of Trustee A Chapter 13 trustee reviews your repayment plan, collects your monthly payments, and distributes them to creditors over the three-to-five-year life of the plan.6United States Courts. Chapter 13 Bankruptcy Basics In Chapter 11 reorganizations the business usually stays in control as a “debtor in possession”; a separate Chapter 11 trustee is appointed only in rare cases involving fraud or gross mismanagement.7United States Courts. Chapter 11 – Bankruptcy Basics Trustees are fiduciaries to the bankruptcy estate, which means their legal duty runs to the creditors and the estate, not to you.

What You Have To Do Before You File

You must complete a credit counseling session with a nonprofit agency approved by the U.S. Trustee’s office within the 180 days before you file.8Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor The briefing covers budgeting and alternatives to bankruptcy and typically costs $10 to $20, with fee waivers available for those who can’t afford it. Skip it and the court can dismiss your case.9United States Department of Justice. Credit Counseling and Debtor Education Information A narrow emergency exception allows a temporary waiver of up to 30 days if a session wasn’t available within seven days of your request, with a possible 15-day extension for cause.

A second course, debtor education, is required after filing but before the court will enter your discharge. Skip that one and the case closes without wiping out your debts.9United States Department of Justice. Credit Counseling and Debtor Education Information

Chapter 7 filers also have to pass a means test. The test compares your income to the median income for a household of your size in your state. Below the median, you qualify. Above it, the test deducts certain allowable expenses to determine disposable income, and if that number is too high you may be pushed into Chapter 13 instead.10United States Department of Justice. Means Testing The median income figures are updated periodically; the current set took effect April 1, 2026.11United States Department of Justice. Median Family Income Data – On or After April 1, 2026

The Documents That Start Your Case

Filing uses a standard set of Official Bankruptcy Forms available on the U.S. Courts website.12United States Courts. Bankruptcy Forms The voluntary petition formally opens the case. Along with it come a series of schedules that lay out your financial picture:

  • Schedule A/B lists all real estate and personal property you own.
  • Schedule C lists property you claim as exempt from liquidation.
  • Schedule D lists creditors with secured claims, like mortgage lenders and auto loan companies.
  • Schedule E/F lists creditors with unsecured claims, like credit cards and medical bills.
  • Schedules I and J report your monthly income and monthly expenses.

The Statement of Financial Affairs covers your financial history over the prior several years, including income sources, property transfers, lawsuits, and closed bank accounts. You also submit a creditor mailing matrix listing names and addresses for every entity you owe. The court uses that list to notify everyone about the filing and the automatic stay. Leaving a creditor off can cause real problems, including an argument that their debt survives the bankruptcy. Federal law also requires copies of all pay stubs or other payment records from the 60 days before filing.13Office of the Law Revision Counsel. 11 USC 521 – Debtor’s Duties

What Happens After You File

The automatic stay takes effect the moment the petition is filed. It’s one of the strongest protections in bankruptcy law and immediately stops most collection activity: lawsuits, wage garnishments, foreclosure proceedings, repossessions. Creditors who knowingly violate the stay can face sanctions.14Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay Attorneys usually file electronically through CM/ECF, which dockets the petition and triggers the stay instantly.15United States Courts. Electronic Filing (CM/ECF) Self-represented filers can file through CM/ECF in some courts or bring paper documents to the courthouse.

The court then schedules a Meeting of Creditors, often called a 341 meeting. In Chapter 7, it happens between 21 and 40 days after filing. Chapter 11 and Chapter 13 allow up to 50 days. There is no judge. The assigned trustee questions you under oath about your schedules and financial disclosures, creditors can show up and ask questions (most don’t), and the whole meeting is recorded.

After the 341 meeting, creditors and the trustee have a window to object to your discharge. In Chapter 7, a complaint objecting to discharge must be filed within 60 days after the first date set for the meeting of creditors.16Legal Information Institute. Federal Rules of Bankruptcy Procedure Rule 4004 If no one objects and you’ve met every requirement, the court enters a discharge order releasing you from personal liability on most debts. A routine Chapter 7 case usually finishes in four to six months. Chapter 13 takes much longer, because the discharge only enters after you’ve completed every payment under the three-to-five-year plan.6United States Courts. Chapter 13 Bankruptcy Basics

Some disputes within a case need more than a motion. When a party has to sue someone in connection with the bankruptcy, they file an adversary proceeding, which runs as a separate lawsuit inside the bankruptcy court with its own case number, pleadings, and discovery. Challenges to the dischargeability of a specific debt and actions to recover property transferred before filing are typical examples.

What the Automatic Stay Doesn’t Stop

The stay is broad, not absolute. Several categories of proceeding continue regardless of your filing:17Office of the Law Revision Counsel. 11 US Code 362 – Automatic Stay

  • Criminal cases. A prosecution continues; bankruptcy does not shield you from criminal liability.
  • Domestic support obligations. Actions to establish or collect child support and alimony are not stayed, custody and visitation orders can still be modified, and income withholding for support continues.
  • Government regulatory actions. Agencies can enforce health, safety, and environmental rules, a tax audit can proceed, and the IRS can issue a notice of deficiency.
  • Expired commercial leases. If a nonresidential lease ended before filing, the landlord can keep pursuing possession.
  • Certain financial contracts. Parties to derivatives, repurchase agreements, and similar instruments keep their contractual rights to close out positions.

Repeat filers face shorter protection. If you had a case dismissed within the past year and file again, the stay in the new case lasts only 30 days unless you convince the court the new filing is in good faith. With two or more dismissals in the prior year, you get no automatic stay at all unless the court orders one.14Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay

Debts That Survive a Discharge

Not every debt disappears. Federal law lists categories that survive, and this is where filers are most often caught off guard:18Office of the Law Revision Counsel. 11 US Code 523 – Exceptions to Discharge

  • Child support and alimony. These survive without exception.
  • Most tax debts. Recent taxes, fraudulently filed returns, and taxes for which no return was filed are not dischargeable. Older tax debts (generally more than three years old with timely filed returns) may qualify in some cases.19Internal Revenue Service. Declaring Bankruptcy
  • Student loans. Educational debt generally survives unless you file a separate adversary proceeding and prove that repayment would impose an undue hardship. The Department of Justice and Department of Education have issued updated guidance providing a more structured analysis, but the burden still falls on the debtor.20Federal Student Aid. Undue Hardship Discharge of Title IV Loans in Bankruptcy Adversary Proceedings
  • Debts from fraud. Money obtained through misrepresentation isn’t dischargeable. Luxury purchases over $900 within 90 days of filing and cash advances over $1,250 within 70 days are presumed fraudulent.
  • Debts from willful and malicious injury to someone or their property.
  • Drunk driving judgments for death or injury.
  • Government fines and penalties, including criminal restitution.
  • Property settlement obligations owed to a former spouse or child under a divorce decree, even if they aren’t technically “support.”

Debts you accidentally leave off your schedules can also be treated as non-dischargeable if the omission kept the creditor from participating. Accuracy on your schedules and creditor matrix matters for this reason alone.

Reaffirmation Agreements

In a Chapter 7 case, you sometimes want to keep collateral like a car with an outstanding loan. A reaffirmation agreement lets you do that by voluntarily staying personally liable on the debt after discharge. You’re carving that one obligation out of the bankruptcy and agreeing to keep paying as if you never filed.21Office of the Law Revision Counsel. 11 US Code 524 – Effect of Discharge

The downside is real. If you later fall behind, the creditor can repossess the property, sell it, and chase you for the deficiency. Chapter 7 filers must wait eight years to file again, so you’d be stuck with that reaffirmed debt and no bankruptcy option. The agreement must be signed before the discharge is entered, and you can rescind it until the later of discharge or 60 days after the agreement is filed with the court. If you have a lawyer, your attorney must declare that the agreement won’t create undue hardship and that you were fully advised. Without a lawyer, the judge holds a hearing and decides whether the agreement is in your best interest.

Dismissal Versus Discharge

These are very different outcomes. A discharge is the goal: the court permanently releases you from liability on eligible debts. A dismissal means the court stopped the case without giving you any relief. Your debts remain intact, the automatic stay lifts, and creditors can pick up collection where they left off.

Cases get dismissed for familiar reasons: skipping the credit counseling or debtor education course, missing a document deadline, failing the means test without converting to Chapter 13, or falling behind on Chapter 13 plan payments. A dismissal can be voluntary (you ask for it) or involuntary (the court, trustee, or a creditor moves for it). In Chapter 13 there’s a third path. A failing Chapter 13 can sometimes be converted to Chapter 7 instead of dismissed, which changes the analysis entirely because liquidation becomes possible.

What It Costs

The court charges a filing fee that varies by chapter. Chapter 7 and Chapter 13 each run a few hundred dollars; Chapter 11 is much more.22United States Courts. Bankruptcy Court Miscellaneous Fee Schedule Individuals can usually pay in installments if they can’t afford the full amount upfront.

Attorney fees are the bigger line. A standard Chapter 7 typically runs about $800 to $3,000 depending on location and complexity. Chapter 13 fees commonly fall between $4,500 and $8,500 because of ongoing plan administration. Many courts publish “no-look” fee guidelines in Chapter 13 that let attorneys charge up to a set amount without detailed court review.23Legal Information Institute. Federal Rules of Bankruptcy Procedure Rule 2016 – Compensation for Services Rendered Your attorney has to disclose the full fee to the court and the U.S. Trustee within 14 days of filing.

Non-attorney petition preparers can help with paperwork if you can’t afford a lawyer, but they can’t give legal advice, recommend a chapter, or explain how bankruptcy law applies to you. They must give written notice that they aren’t lawyers, and their fees are subject to court review.24Office of the Law Revision Counsel. 11 US Code 110 – Penalty for Persons Who Negligently or Fraudulently Prepare Bankruptcy Petitions Preparers who cross those lines can be fined, with the court able to triple the amount in egregious cases.

The Creditor Side

Creditors have their own role and their own deadlines. Once a case is filed, they receive notice of the stay, the 341 meeting, and the deadline to file a proof of claim. In a voluntary Chapter 7, 12, or 13, the general proof-of-claim deadline is 70 days after the order for relief; government agencies get 180 days.25Legal Information Institute. Federal Rules of Bankruptcy Procedure Rule 3002 – Filing Proof of Claim or Interest A creditor that misses the deadline may lose any right to a distribution.

Creditors can also challenge your discharge. They may file an adversary proceeding arguing a specific debt should survive because of fraud, willful injury, or another non-dischargeable category. The trustee can object independently if the investigation turns up concealed assets or dishonest filings. In Chapter 13, creditors can object to the proposed repayment plan if it isn’t feasible or doesn’t pay them at least what they’d receive in a Chapter 7 liquidation. The judge resolves those disputes through hearings, and the rulings bind the parties unless successfully appealed.