How Much Debt to File for Bankruptcy

Introduction

Dealing with overwhelming debt can be stressful, and at times, declaring bankruptcy may seem like the only viable solution. However, the decision to file for bankruptcy is not one to be taken lightly. One of the key considerations is the amount of debt you owe. In this article, we will explore the debt thresholds for filing bankruptcy.

Understanding Bankruptcy

Bankruptcy is a legal process that allows individuals or businesses to seek relief from their debts. It can provide a fresh start, but it also comes with significant consequences, including a long-term impact on your credit score. Therefore, it’s crucial to understand the process and its implications before proceeding.

Debt Threshold for Bankruptcy

It’s a common misconception that there is a specific amount of debt you must have before you can file for bankruptcy. The truth is, there is no minimum amount of debt required to file for bankruptcy. The decision is more about your ability to repay your debts.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy, also known as liquidation bankruptcy, allows for the discharge of unsecured debts such as credit card debt or medical bills. To qualify for Chapter 7 with an attorney, you must pass a “means test” that evaluates your income, expenses, and the total amount of your debt. If your income is below the median in your state, you automatically qualify.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy, on the other hand, is designed for individuals with regular income who can pay back a portion of their debts through a repayment plan. The amount of debt you owe does have limits in Chapter 13. As of 2021, your unsecured debts must be less than $419,275, and your secured debts must be less than $1,257,850. These debts limits change over time.

Seeking Legal Advice

If you’re considering bankruptcy, it’s essential to seek advice from a competent bankruptcy attorney. The legal team at Liviakis Law Firm can help you understand your options and choose the best course of action for your situation. For more information or to schedule a consultation, call us at 916 459 2364.

Conclusion

Bankruptcy is a complex process, and the decision to file should not be based solely on the amount of debt you owe. It’s crucial to consider your overall financial situation, your ability to repay your debts, and the potential consequences of bankruptcy with an experienced Modesto bankruptcy lawyer. By seeking professional legal advice, you can make a well-informed decision that best serves your financial future.