How Much Debt Do You Need to File Bankruptcy?
A Chapter 7 bankruptcy is the most common type of consumer bankruptcy to get rid of debt that you cannot afford to keep. Whether it is debt from medical treatment, credit card purchases, pay day loans, or left over debt from a repossession, a Chapter 7 bankruptcy can wipe it all out. So, what happens if you only have a small amount of debt yet you cannot afford to pay it? Bankruptcy is still an option for you. There is no minimum amount of debt that qualifies you to file bankruptcy. If you fit within the qualification criteria of a Chapter 7 where either your income fits into the income thresholds for your household size or if your debt payments and living expenses are exceeded your monthly income, you can use bankruptcy to solve your debt problem. You and your bankruptcy attorney can work together to decide if a bankruptcy is the right decision for you.
The bankruptcy code does not specify a minimum amount of debt in a Chapter 7 bankruptcy. There is no instruction on how small your debts can be. Essentially, if you have a $10 debt, you can get it discharged in bankruptcy. Obviously, the only thing left to judge is the cost of the bankruptcy. In a more realistic example, let’s say that you have $5000 worth of debt. If you are making $100,000 a year and have manageable expenses, a $5000 debt may not be a huge issue, but if you are unemployed and need the $5000 to make your rent payments over the next 6 months while you look for a job, you may need to file bankruptcy in order to stop collections activities on the $5000 that you owe.
Keep in mind that your current debt amount will not always stay the same. If you are past due on your debt and collection activities ensue, you may be charged a higher interest rate, late payment fees, and even attorney fees that are added on to the judgment against you if a credit decides to sue you in court. In this situation, a $5000 debt can easily grow into a $10,000 debt quicker than you would imagine. Your best course of action is to take your situation to a local bankruptcy attorney, give them the information they need to help you decide whether or not to move forward with a bankruptcy.
Bankruptcy Law Professionals is a bankruptcy law firm located in Southern California with bankruptcy attorneys in Riverside, Orange County, and Los Angeles to help you. Schedule a free consultation by phone or in-person at 855 257-7671.