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United States law allows courts to declare individuals and businesses bankrupt, allowing them to settle debts without full payment. Filing bankruptcy is a legal action asking the court to make this declaration; deciding to file should account for:

  • Debts that are owed
  • Assets that could be affected by the decision
  • Assets that are exempt from the decision, which vary by state
  • Eligibility for bankruptcy discharge, based on your means

Some types of bankruptcy, like Chapter 7, include a ‘means test.’ Filing typically involves taking a credit-counseling course, then completing a Bankruptcy Petition with the US Court. Full proceedings will require additional forms and information, and usually at least one meeting with the bankruptcy trustee. The full course of settlement will vary; objections or motions by creditors, winding up of secured debts, and other matters may differ based on circumstances. The final step is completing a debtor education course before the court issues a discharge.


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