The United States Bankruptcy Court was created to give people a path forward when debt becomes too much to handle. If you qualify, the courts want you to use it. That’s what it’s there for. So if you’ve been avoiding this topic, it’s time to shift your mindset!
The United States Bankruptcy Court Exists to Give You Options
The United States Bankruptcy Court is not here to punish you. It’s here to help you reset. More than 500,000 people file for bankruptcy in the U.S. each year. Most of them never imagined they would. But life happens, and bankruptcy exists to help you recover when it does.
Medical bills are the number one reason people file, especially in a country where safe, affordable health care isn’t guaranteed. Divorce, job loss, death of a spouse, and failed businesses are close behind. Some people have been scammed or financially abused. Others fall behind because they’ve had to care for a sick child or aging parent.
These are life experiences. These are not moral failings.
Sometimes people overspend, but even then, it’s rarely the whole story. Overspending usually shows up alongside something else: a loss of income, an emotional crisis, or a period of survival-mode thinking.
Press Play: Why Good People File Bankruptcy
The United States Bankruptcy Court provides a legal path forward so that one crisis doesn’t become a lifelong burden. So if you’ve been judging yourself harshly, it’s time to shift that perspective. The court isn’t judging you.
In fact, even Walt Disney filed for bankruptcy. And if he hadn’t, there would be no Disneyland.
Why People Don’t File Sooner
When you’re in debt, your brain goes into survival mode. You avoid the mail and stop answering the phone. Very often, you feel paralyzed, ashamed, and overwhelmed. And that is completely normal. But here’s the problem: Staying frozen doesn’t protect you.
When you’re under intense stress, your brain activates the amygdala, the part responsible for detecting threats. This triggers the fight, flight, or freeze response. Blood flow is redirected away from the prefrontal cortex, which is the part of the brain responsible for logic, decision-making, and planning.
As Dr. Bruce Perry, a leading neuroscientist and co-author of What Happened to You? explains, “When we’re dysregulated, the thinking part of the brain shuts down. You literally can’t access rational problem-solving when your survival brain takes over.”
That’s why even simple tasks, like opening a bill or returning a phone call, can feel impossible. Your brain is trying to protect you from a perceived threat, but in doing so, it blocks the very part of you that could find a solution.
The way out starts with a single action. Something small that signals to your brain: “I’m not in danger. I’m taking control.”
Need Help?
If you’re considering bankruptcy, talk to a debt professional. The earlier you understand your options, the more control you’ll have.
Click here to schedule a free consultation with a debt professional.
What Happens When You File
When you file a bankruptcy case in the United States Bankruptcy Court, something called an automatic stay takes effect.
The automatic stay is one of the most powerful protections in all of bankruptcy law, and here’s why …
As soon as your case is filed:
- Creditors must stop calling, emailing, or sending letters
- Wage garnishments must stop
- Foreclosure and eviction proceedings are paused
- Lawsuits over unpaid debts are put on hold
- Utility shutoffs are delayed
- Repossessions are blocked
Press Play: Learn About the Automatic Stay
The automatic stay happens immediately. The moment your case hits the court’s system, the protection is in place per federal law. Creditors can’t just keep coming at you while the court reviews your case.
If your wages were being garnished, the automatic stay stops the garnishment. If you were facing eviction or foreclosure, it presses pause. If you were being sued or harassed, those actions must stop.
And if a creditor violates the stay? They can face serious penalties.
Creditors can’t just keep coming at you while the court reviews your case. That’s the point. The automatic stay is there to protect you while you take the first steps toward a real solution. It’s one of the clearest signals that the court is on your side, and that you don’t have to live under constant financial threat anymore.
Why the Longer You Wait, the Harder It Gets
Being in debt has a trickle-down effect. Every month you stay stuck is another month of:
- Late fees and rising interest
- Emotional exhaustion
- Missed sleep, missed opportunity, and missed life
As a result, life gets harder. Your debt feels more and more unmanageable. I have talked to people who have spent decades trying to climb their way out of debt, only to eventually turn to bankruptcy.
And many of them say the same thing: “I wish I had filed sooner.”
That’s part of why the United States Bankruptcy Court exists—to offer a legal solution when debt becomes a barrier to survival. Bankruptcy clears the path for you to participate in life again: to contribute to your family, your community, and the economy.
After all, when someone is stuck in long-term debt, it affects their health, their relationships, their job performance, and their future.
The United States Bankruptcy Court wants people who qualify to explore it, not because they’re trying to encourage bankruptcy, but because they know that unresolved debt keeps people from moving forward … and the longer you wait, the more it costs.
When you file with the United States Bankruptcy Court, you’re using the tools that exist for a reason.
Need Help?
If you’re considering bankruptcy, talk to a debt professional. The earlier you understand your options, the more control you’ll have.
Click here to schedule a free consultation with a debt professional.
Related Articles:
“How Much Does It Cost to File Bankruptcy?”
“Pros and Cons of Filing Bankruptcy: What the Banks Don’t Want You to Know.”
“What Bankruptcy Lawyers Won’t Tell You About the Process”
FAQ: What is bankruptcy?
Bankruptcy is a legal process that helps people or businesses who can’t afford to pay their debts get a fresh financial start.
When you file for bankruptcy, you submit paperwork to the United States Bankruptcy Court that outlines your income, debts, assets, and expenses. The court reviews your situation and places a hold, called an “automatic stay,” on most collection activities. That means creditors have to stop calling, garnishing your wages, or suing you while the court sorts things out.
Next, a trustee is assigned to your case. Depending on which type of bankruptcy you file (typically Chapter 7 or Chapter 13), your debts will either be discharged (wiped out) or reorganized into a payment plan you can afford. Throughout this process, you’re protected by federal law.
Bankruptcy doesn’t erase all debts, but it does eliminate many of the most burdensome ones, like credit card balances, medical bills, and personal loans.
Over 500,000 Americans file for bankruptcy each year, and many say the same thing afterward: “I wish I’d done it sooner.” Many people who file are dealing with things like job loss, divorce, medical issues, or overwhelming interest that keeps growing no matter how much they pay.
FAQ: Who qualifies for bankruptcy?
Many people qualify for some form of bankruptcy, but the type you’re eligible for depends on your income, debt, and financial situation.
To qualify for Chapter 7 bankruptcy, which wipes out most unsecured debts (like credit cards and medical bills), you must pass something called the “means test.” This test looks at your income compared to the median income in your state. If your income is below that level, or if your expenses leave you with little to no disposable income, you’ll likely qualify.
If you don’t pass the means test, you may still be eligible for Chapter 13 bankruptcy, which allows you to reorganize your debt into a manageable repayment plan that lasts 3 to 5 years. Chapter 13 is often used by people who have regular income but have fallen behind on secured debts like a mortgage or car loan.
According to the American Bankruptcy Institute, hundreds of thousands of people file each year, and the most common reasons have nothing to do with reckless spending. Many filers are working professionals, retirees, single parents, or small business owners who hit a financial wall due to medical bills, job loss, divorce, or caregiving responsibilities.
If your debt feels unmanageable, if minimum payments don’t make a dent, if you’re skipping bills, or if you’re facing lawsuits or garnishments, it’s time to explore whether you qualify. The court wants you to use this process if it can help you move forward.
FAQ: What’s the difference between Chapter 7 and Chapter 13?
Chapter 7 and Chapter 13 are the two most common types of personal bankruptcy.
Chapter 7 bankruptcy is known as “liquidation,” but most people keep all of their belongings. If you qualify, your unsecured debts, like credit cards, medical bills, and personal loans, are wiped out entirely. The process usually takes about 3 to 4 months.
To file, you must pass something called a “means test,” which determines whether your income is low enough based on your household size and state. Chapter 7 is typically the best option if you don’t have significant assets and need a clean break.
Chapter 13 bankruptcy is a “reorganization.” Instead of wiping out your debt immediately, you create a 3- to 5-year payment plan based on your income and expenses. Chapter 13 is a good fit if you’re behind on your mortgage or car loan but want to keep your property. It’s also for people who earn too much to qualify for Chapter 7 or have non-dischargeable debts they need time to catch up on.
Real-world example: A single parent working part-time might qualify for Chapter 7 and be able to eliminate $40,000 in credit card debt. A married couple with steady income who fell behind on their house payments might file Chapter 13 to catch up and avoid foreclosure.
The right choice depends on your goals, income, and types of debt. A bankruptcy attorney can help you understand which one fits your situation best.
FAQ: How long does a bankruptcy stay on my credit report?
A Chapter 7 bankruptcy stays on your credit report for 10 years from the filing date, while a Chapter 13 stays for 7 years.
But here’s what’s often misunderstood: your credit score is not frozen for that entire time. In fact, many people begin rebuilding credit within just a few months of filing. The presence of a bankruptcy on your report matters, but what matters more is what you do after.
Lenders and credit-scoring models pay close attention to your recent behavior. If you start making on-time payments, keep your balances low, and use credit responsibly, your score can recover much faster than most people think.
We’ve seen people go from the low 500s to a 720 credit score within 12 to 24 months after bankruptcy, especially if they follow a structured credit rebuilding plan like 7 Steps to a 720 Credit Score..
FAQ: Will people find out if I filed for bankruptcy?
Probably not. Bankruptcy is part of the public record, but that doesn’t mean everyone will find out. Your case will be listed in the federal court system, which means someone could technically look it up. But it won’t appear in local newspapers, and it won’t be announced publicly unless you’re a public figure or your case is unusually newsworthy.
Most people who file for bankruptcy do so quietly, and in everyday life, it rarely comes up. Friends, coworkers, and family won’t automatically be notified. In fact, unless you tell someone, they likely won’t know.
There are a few exceptions where your filing might be discovered:
– If you apply for a mortgage, background checks may reveal it
– If you apply for rental housing, some landlords check public records
– If you apply for a job that runs detailed credit reports, your employer might find out
That said, many employers and landlords are more concerned with your current financial stability than your past. Bankruptcy shows you took steps to deal with your debt rather than ignoring it.
In short, yes, it’s technically public—but for most people, it remains a private, personal decision.
