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How Much Debt Do I Need To File Bankruptcy?

September 15, 2010

There is no qualifying minimum debt limit for an individual bankruptcy.  Debtors who otherwise qualify for Chapter 7 bankruptcy can file with any amount of secured or unsecured debt.  The purpose of a Chapter 7 bankruptcy is to provide the debtor a fresh start without the burden of overwhelming debt.  In some cases this debt may be objectively very small (perhaps only a few thousand dollars), but it be relatively very large to a person on a fixed income from retirement, disability, or otherwise.


In cases where the amount of dischargeable debt is objectively small, both the bankruptcy attorney and the client should take care to consider all of the consequences of filing.  First, bankruptcy is not cheap.  There is a court filing fee, a credit counseling fee, a personal financial management course fee, and, of course, your attorney’s fees.  In some extreme cases some or all of these fees may be waived.  Second, a bankruptcy filing can significantly impair the debtor’s ability to borrow money and obtain credit, at least for the short term.  Finally, non-exempt property may be at risk.  For many poor debtors, these consequences have little, if any, affect.  Many poor debtors seek bankruptcy protection simply to rid themselves of the nuisance of debt collection.


While there is no minimum amount of debt required to file a Chapter 13 bankruptcy, the bankruptcy laws set a ceiling on the amount of secured and unsecured debt a person can have in a Chapter 13 case.  These limits as of April 1, 2010 are $1,081,400 for secured debt and $360,475 for unsecured debt.  The Chapter 13 debt limits adjust every three years.  Cases that exceed these limits are ineligible for Chapter 13 bankruptcy, but may qualify under Chapters 7 or 11.  There is currently some confusion in our courts as to how these debt limits apply in a joint husband and wife Chapter 13 case.  Some courts will separately consider debt that is individual and not joint, effectively increasing the Chapter 13 limits.


An experienced bankruptcy attorney can evaluate your case and discuss any issues surrounding your case.  Whatever the amount of your debt, if you are unable to pay, the federal bankruptcy laws can offer you substantial relief.  Speak with an experienced bankruptcy attorney and discover how the federal bankruptcy laws can help you.



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