Does Bankruptcy Require a Specific Amount of Debt?


No minimum amount of debt is required to file bankruptcy. It’s unlikely that filing for bankruptcy would make sense unless your current debts are causing you serious problems. Your circumstances will determine whether or not bankruptcy is right for you. How much you earn, and how much debt you have will determine whether you qualify for bankruptcy. Chapter 7 filers might earn too much or have too many disposable incomes to file under Chapter 7, while Chapter 13 filers could find that they owe too much to qualify for Chapter 13. We’ll look in more detail at the debt qualification requirements for bankruptcy and how that may affect your situation.

When is it a Good Idea to File for Bankruptcy?

It is not necessary to have a minimum debt amount. However, it may be advisable for some people. If you decide to file, it depends on three key questions:

  • Can I pay off my debts and avoid bankruptcy?
  • Is my creditor willing to negotiate with me about changing the terms of my loan contract?
  • Can bankruptcy eliminate the debts that I owe?

Sitting down with a bankruptcy lawyer to discuss your case will provide you with all of the information.

Chapter 13 Debt Limits

There is no minimum amount you must owe in order to file for bankruptcy. However, there is a maximum amount that can be owed for certain types of bankruptcy. In 2020, the maximum amount of unsecured debt you can owe is $419,275. The maximum amount for Chapter 13 bankruptcy is $1,257.850.

Chapter 7 Income Limits

To prevent bankruptcy abuse, Chapter 7 has a means test. You will need to pass a means test if you earn more than your state’s adjusted median income. If your income is less than the median state income, you are automatically eligible.

The means test compares your income to your expenses. The less likely you are to qualify for Chapter 7 the more income you have available.

Are You Able to Pay off Your Debts Without Bankruptcy?

You will not be able to file bankruptcy for several years if you decide to do so hastily. If you declare bankruptcy, receive a discharge, and then continue to accumulate debt in the following years, you could be left with no legal recourse when your debts become out of control.

It’s important to exhaust all other options first if you can repay your debts without going bankrupt. You might be able to negotiate lower payments, an extended loan term, or settle your debts at a price less than what you owe. Not all creditors are willing to negotiate with you. However, mentioning bankruptcy in the negotiation process can be helpful. No creditor would prefer to get nothing over something.

Can Bankruptcy Eliminate the Types of Debts I Owe?

There’s no way to eliminate all debts with bankruptcy. Some types of bankruptcy may be better for certain debt types. You will need to know which types of debt will be eliminated and which will remain before you decide to file bankruptcy. You will also want to know how your finances will be after your debts are wiped out.

You’ll need to ensure that you can continue making payments for your Chapter 13 reorganization.

This post was written by Trey Wright, an experienced bankruptcy lawyer Jacksonville FL! Trey is one of the founding partners of Bruner Wright, P.A. Attorneys at Law, specializing in bankruptcy law, estate planning, and business litigation.

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