How Much Debt Do I Need to Have to File Bankruptcy?

People sometimes put off bankruptcy because they think they have too much or too little debt to file. They may feel guilty and that they should be able to pay things off if their debt is relatively small. Or they may be embarrassed by just how far into debt they are. My clients often wonder if there are set minimums or maximums owed to qualify for bankruptcy. This depends on which chapter of bankruptcy you decide to file, and this is something we can work through together.

Chapter 7

In order to qualify for a Chapter 7 bankruptcy, you must pass the Means Test, but there is no set minimum or maximum amount of debt you can or must include. In general, if the debt is too much for you to pay each month and to pay off completely in a reasonable length of time, bankruptcy might be your best choice. If your income is low, or you’re dealing with collection agencies or wage garnishments, owing just a few thousand dollars could justify bankruptcy. If possible, do your best to cut your budget and work with creditors to arrange payment plans. You may only file a Chapter 7 bankruptcy once every eight years, so it’s not a decision to be made lightly. There are no upper limits of debt to file a Chapter 7, as long as you pass the Means Test, which is based on your income, debt, living expenses, and assets.

Chapter 13

As with a Chapter 7, there is no minimum amount of debt required to file a Chapter 13 bankruptcy. If you are in debt that you can’t keep up with, but do have some income available to make payments, a Chapter 13 might be just the plan for you. This type of bankruptcy is a reconfiguration of your debt, and the court will put you on a reduced repayment plan for 3-5 years. This will give you time to get back on your feet, and at the end of the repayment period, the remainder of most of your debt is discharged. You also get to keep most or all of your property. While there’s no minimum amount of debt required to file, there are maximums that may not be exceeded. You may not have more than $360,000 in unsecured debt and/or $1,081,000 in secured debt. However, if you exceed these limits, don’t worry; we can explore other options for handing your debt.

Ask For Help

If you’re wondering whether bankruptcy is right for you, just give me a call. I’ll assess your situation, including your debt to income ratio, to determine the best possible steps for getting your debt under control and pointing you toward financial freedom.