Bankruptcy Financial Decision Modeling

How this engine works

You enter your own figures; the engine models two scenarios side by side and shows the twelve-month difference between them. The outputs are estimates built from your inputs and documented assumptions — not predictions, and not advice. Mood and stress are self-reported context that adjust the wording of the summary, nothing else. Inputs are processed in your browser. The full methodology, including what the engine does not claim, is on the Decision Center.

Step 2: Decision Forge — compare assumptions

Decision scenarios with reflection prompts

Each scenario in the tool above presents two options drawn from this event and models them side by side from the figures you entered. Before the comparison, the page names a cognitive-bias concept as an educational reflection prompt. It is a general prompt attached to the scenario rather than a finding about you: the page does not test whether the concept applies to your situation, and it does not indicate which option you should choose.

Self-reported context at decision time

The page does not create a psychological profile. Mood and stress may tailor wording and general next-step suggestions. They do not change the entered financial values or scenario math. They do not establish decision readiness. The named bias concept is a general reflection prompt; the page does not detect bias, assess decision capacity, diagnose a condition, or predict outcomes.

Chapter 7 or Chapter 13: what actually differs

Chapter 7 is liquidation. A trustee sells property that is not exempt, distributes the proceeds, and you receive a discharge — typically in months. There is no debt limit, but if your debts are primarily consumer debts you face the means test. Chapter 13 is a repayment plan for someone with regular income: you keep the property and pay creditors over three years if your income is below the state median, five if above, with discharge at completion (US Courts).

Two differences decide most real cases. Chapter 13 stops a foreclosure and lets mortgage arrears be cured over the plan, which Chapter 7 cannot do. And Chapter 13 carries a co-debtor stay that protects someone who co-signed a consumer debt; Chapter 7 does not.

The means test, and the date stamp that matters

The test compares your current monthly income — a six-month lookback average — against the median for your household size in your state. At or below it, no party may bring an abuse motion at all. Above it, allowed expenses are subtracted and the remainder tested against statutory thresholds.

The median figures come from Census data republished by the US Trustee Program, and they change roughly twice a year. The set in force applies to cases filed on or after 1 April 2026. Any means-test figure quoted without its effective date is close to meaningless; check the current table before relying on one (US Trustee Program).

What it costs, and the statutory numbers

Whether you may use those federal figures at all depends on your state. Roughly two-thirds of states have opted out, leaving only the state list available, and which state’s law applies turns on where you were domiciled for the 730 days before filing. This is the part of bankruptcy where a local answer beats a national one.

What bankruptcy does not erase

Child support and alimony, most taxes, debts obtained by fraud, fines and penalties owed to a government, and liability for injury caused while driving intoxicated all survive discharge. So do most student loans, absent undue hardship.

That last one is more open than it sounds. Since November 2022 the Justice Department and Education Department have run an attestation process in which a borrower files the adversary proceeding and completes a standard form; where present ability to pay, future ability to pay and good faith all point the same way, the government stipulates and recommends discharge. That guidance remains in effect and the form was current as of 2026 (US Trustee Program). It is a settlement pathway rather than a change to the statutory standard, and it applies to federal loans only.

How long it follows you

The Fair Credit Reporting Act permits a bankruptcy to be reported for ten years from the entry of the order for relief, and it draws no distinction between chapters (15 U.S.C. § 1681c). You will often read that Chapter 13 falls off after seven; that is a voluntary practice of the credit bureaus, not a legal rule, and it is worth knowing which is which.

Filing again is governed by separate clocks: eight years between Chapter 7 discharges, six years from a prior Chapter 13, and four or two years for a Chapter 13 discharge after an earlier case. The often-quoted “once every seven years” is not one of them.

Before filing you must complete a credit counselling briefing from an approved agency within the preceding 180 days, and a debtor education course afterwards is a condition of discharge.

The automatic stay, and what it does not stop

The single most immediate effect of filing is the automatic stay under 11 U.S.C. § 362. It takes effect on filing, without a hearing and without a judge signing anything: collection calls stop, lawsuits are frozen, wage garnishment stops, foreclosure sales and repossessions are halted. A separate provision protects utilities — service may not be cut off for 20 days after filing, after which the utility may require adequate assurance of future payment (§ 366).

The exceptions are narrower than the fears but broader than people expect. The stay does not stop a criminal proceeding, the establishment or modification of a domestic support obligation or its collection from property that is not property of the estate, a tax audit or the issuing of a notice of deficiency, or the withholding of repayments on a loan you took from your own retirement plan. Filing does not make child support go away and never has.

Repeat filings shorten the stay sharply, and this catches people who have tried before. If you had one prior case dismissed within the preceding year, the stay expires 30 days after filing unless the court extends it on motion. If two or more were dismissed in that year, no stay arises at all unless you ask the court for one (§ 362(c)(3) and (c)(4)). A second filing after a dismissal is a materially different proceeding from a first, and it needs to be planned as one.

Rules that changed recently

Bankruptcy practice is unusually date-stamped, and three changes are recent enough that older guidance is actively misleading.

None of these change the decision between chapters. All of them change the numbers a calculator would use, which is why any tool — this one included — should be treated as a way of framing the question rather than a source of the figures.

Scale, and the alternatives that come first

There were 581,570 non-business bankruptcy filings in the twelve months ending 30 June 2026. That is a statutory remedy in ordinary use by hundreds of thousands of households a year, not a rare or exotic step, and the shame attached to it is out of proportion to how common it is.

It is still not the first move for most debt problems. Three alternatives are cheaper and reversible, and they are worth exhausting first. Negotiated settlement works where a creditor has already charged the debt off and is holding it at a fraction of face value. A debt management plan through a non-profit counselling agency consolidates unsecured payments at reduced interest without a new loan — and the pre-filing counselling briefing the Code requires anyway is an opportunity to ask whether one would work. And old debt may simply be unenforceable: every state sets a statute of limitations on suit, after which the debt can be asked for but not sued on, though in many states a partial payment restarts the clock.

Bankruptcy earns its place when the arithmetic does not close — when the debt cannot be repaid on any realistic schedule, when a foreclosure or garnishment is already running, or when the alternatives would take longer than the harm allows. That is a question about your numbers, which is what the engine above is for, and then a question of state law and local practice, which it is not.

Where to go deeper

• The bankruptcy financial reset
• Debt management during a financial crisis
• Debt triage prioritiser
• Does medical debt lead to bankruptcy?