Two questions we often get from clients who want to file bankruptcy are:
- Do I have enough debt to file bankruptcy?
- Do I have too much debt to file bankruptcy?
We understand why they ask these questions. Some may believe that while their debt seems burdensome to them the bankruptcy court may not consider it enough to file bankruptcy. While others may believe their debts are so numerous the bankruptcy court will consider them too large to receive discharge through bankruptcy.
There are debt requirements and limits when filing bankruptcy. But, ultimately, the amount of debt one has rarely affects their ability to file bankruptcy. Let us explain.
Bankruptcy Has No Minimum Debt Amount Limitation
Bankruptcy laws do not require a debtor to have a minimum amount of debt to be eligible for bankruptcy. Although this is beneficial, it should not be the deciding factor on whether filing bankruptcy is in your best interest.
Whether bankruptcy is the right answer for you depends on your individual financial circumstances. There are many important factors to consider when determining if you should file for bankruptcy. These factors can include:
- whether you have enough income to repay your debts outside of bankruptcy
- whether your creditors may offer a resolution outside of bankruptcy
- whether the types of debt you have can be discharged in bankruptcy
- whether your creditors are suing you, garnishing your wages, or about to foreclose or repossess your property
Maximum Debt Limits for Chapter 13 Bankruptcy
While there is no minimum debt amount required to file Chapter 7 or Chapter 13 bankruptcy, there is a maximum debt limit when filing for Chapter 13 bankruptcy.
As of April 1, 2016, the debt limits for filing a chapter 13 bankruptcy are:
- Unsecured Debt Limitation: $419,275.00
- Secured Debt Limitation: $1,257,850.00
The secured debt limitation includes the total of what a debtor owes on things they have secured by collateral. The unsecured debt limitation includes the total of what a debtor owes on things such as:
- credit card debt
- medical bills
- payday loans
- personal loans
- some utility charges
Bankruptcy laws adjust the debt limitations every three years. So, the next debt limitation change will occur April 1, 2023.
Should You File Bankruptcy?
If the amount of your debt falls within these parameters, you could file bankruptcy. But, knowing if bankruptcy is the best thing for you requires looking at your financial circumstances in comparison with bankruptcy laws.
An experienced bankruptcy attorney knows the ins and outs of bankruptcy regulations and how they would relate to your financial circumstances. If you want to know if bankruptcy is a good option for you, reach out to us today for a free evaluation of your financial situation.