How Much Debt Do I Need to File for Bankruptcy?

Deciding to file for bankruptcy can be confusing, especially if you’re unfamiliar with the process. Many potential bankruptcy filers need help understanding the debt required to initiate the filing. The answer is more complex than a straightforward number, so the Whitten & Whitten team is here to guide you and help you grasp the many factors involved. 

Understanding Bankruptcy

First and foremost, it’s important to understand that bankruptcy is for more than just those with overwhelming amounts of debt. While high levels of debt are often a contributing factor in filing for bankruptcy, other considerations include income, assets, and ability to pay back creditors. In fact, there are different types of bankruptcy filings (Chapter 7 vs Chapter 13), which have varying requirements based on your financial situation. 

Chapter 7, or “straight bankruptcy,” involves the sale of a debtor’s nonexempt property and the distribution of the earnings to creditors. It provides a clean slate by discharging the remaining debt after selling assets.

Chapter 13, on the other hand, is a reorganization bankruptcy for individuals with a regular income. It allows the debtor to keep property and pay debts over time, usually three to five years. This chapter is often chosen by those behind mortgages or car payments who want to avoid foreclosure or repossession. 

Am I Eligible for Bankruptcy?

There is no predetermined amount of debt that necessitates filing for bankruptcy. Instead, your eligibility is determined by the nature of your debts, your income and expenses, and the assets you possess.

Generally speaking, individuals with unsecured debts, including credit card debt, medical bills, and personal loans exceeding $10,000 may be considered for bankruptcy. For secured debts (such as mortgages and car loans), the amount owed will depend on the value of the collateral. In some cases, individuals with less than $10,000 in debt may still benefit from filing for bankruptcy if they have a significant amount of nonexempt assets.

Additionally, certain types of debt are not dischargeable in bankruptcy, including most taxes, student loans, and child support payments. This means that even if you have a significant amount of debt, bankruptcy may provide little relief for these specific types of debt.

Ultimately, the decision to file for bankruptcy should not be based solely on the amount of debt you have. The best way to determine your bankruptcy eligibility is to consult an experienced bankruptcy attorney. They can analyze your financial situation and help you understand the potential benefits and consequences of filing for bankruptcy.

Trust Whitten & Whitten for Your Bankruptcy Needs

At Whitten & Whitten, we have years of experience helping individuals and businesses navigate bankruptcy. Our team understands that every case is different, and we strive to provide personalized solutions to each client. With our solid legal knowledge and skills, we can effectively walk you through the bankruptcy process and help you achieve a fresh start. It’s time to stop letting your debt continue to weigh you down – contact Whitten & Whitten today for dependable legal representation in your bankruptcy case.