If you find yourself in a situation where you cannot repay your debts, filing for bankruptcy may be an option to consider. However, you may be wondering how much debt is required to file for bankruptcy. The answer is not straightforward as it depends on several factors that we will discuss in this post. Read on to learn more about the threshold for filing bankruptcy.
Types of Bankruptcy
There are two types of bankruptcy that individuals can file for under the U.S. bankruptcy code – Chapter 7 and Chapter 13 bankruptcy. For Chapter 7 bankruptcy, there isn’t a specific dollar amount required to file. Instead, you must pass the means test, which is calculated based on your income, assets, and expenses.
Essentially, you’re eligible if your income falls below the state median income for a household of your size. However, if your income is above the median, you may still qualify under certain circumstances. This includes having a low-enough disposable income.
On the other hand, Chapter 13 bankruptcy requires you to have less than a certain amount of unsecured and secured debt to be eligible. The debt limits for Chapter 13 bankruptcy are adjusted periodically to reflect changes in the consumer price index. If your debts exceed these limits, you may not be able to file for Chapter 13 bankruptcy and may need to consider Chapter 7 or other debt-relief options.
Other Factors to Consider
In addition to the debt limits and means test, there are other factors to consider when deciding whether to file for bankruptcy.
For example, do you have significant assets? This includes valuable property or a sizeable savings account. In these cases, you may want to consider the impact bankruptcy will have on those assets. Additionally, if you have a steady income, you may want to explore debt repayment options, such as debt consolidation or credit counseling, before filing for bankruptcy.
It is essential to understand that bankruptcy should not be your first choice when dealing with debt. Bankruptcy has far-reaching consequences. This includes damage to your credit score, potential loss of assets, and a mark on your credit report. Before deciding to file for bankruptcy, you should consult with a bankruptcy attorney. You can discuss your options and determine if bankruptcy is the best choice for your circumstances.
Working with a Bankruptcy Attorney
Filing for bankruptcy is a complex and often difficult decision to make. The amount of debt required to file depends on several factors, including the type of bankruptcy you opt for, your income, assets, and debts.
Additionally, bankruptcy has long-lasting consequences that should be carefully considered before making a decision. If you are struggling with debt, seek the advice of a bankruptcy attorney or credit counselor to explore your options and determine what course of action makes the most sense for your unique financial circumstances.