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Is There a Minimum of Debt in Order to File for Bankruptcy?

On Behalf of | Jun 3, 2021 | Bankruptcy

Debt is a personal thing. The amount of debt that is manageable for one person is overwhelming for another. While there is no minimum amount of debt necessary to file for bankruptcy, there are other important factors to consider to determine if filing for bankruptcy is practical.

Often, the best what to figure out whether filing for bankruptcy is a practical or beneficial option is to speak with a professional. Our empathetic bankruptcy attorneys have decades of experienced advising and guiding people through the bankruptcy process.

Whether you should file for bankruptcy is not always an easy question to answer. At The Bankruptcy Group, you could review your financial situation with one of our attorneys during a free and confidential consultation. Call our law offices at 888-710-4334 to start taking steps in the right direction.

Determining If You Should File for Bankruptcy

If you have a significant amount of debt, filing for bankruptcy could be an option. If you only owe a few hundred dollars, then bankruptcy is probably not a reasonable path to take. However, the amount of debt is only one factor. Every individual is unique and every situation requires a different strategy.

Some people might not consider filing for bankruptcy because they are making their monthly payments. The belief is, that if there is no default, then things are fine. However, it is not uncommon for many people to only make the minimum payment each month or transfer entire balances in hopes of lowering an interest rate. If you have multiple maxed-out credit cards, lack funds for other necessities, and cannot save any money, filing for bankruptcy might make sense. While the amount of debt should be a consideration, it is not always the overriding one. If you are fighting to pay your monthly bills or are just unable to pay your debt down, contact our bankruptcy attorneys. If you are able to eliminate a substantial portion of your debt, you could experience a sense of relief and begin saving for the future.

Can You Pay Your Monthly Bills?

Everyone’s financial situation is unique. One person’s insurmountable debt is another person’s average monthly expenses. If you find yourself struggling to pay your mortgage, rent, utilities, and other bills, then you might consider filing for bankruptcy. If you are eligible, you could qualify for Chapter 7 and eliminate a substantial portion or all your unsecured debt. If you free yourself from the monthly burden of interest payments and credit card bills, you might be able to manage your required monthly expenses. By sitting down with one of our experienced bankruptcy attorneys, you will have the opportunity to thoroughly review your income, expenses, and options. For many people, this process alone allows them to finally see the big picture and the advantages of filing for bankruptcy.

Secured Debts and Filing for Bankruptcy

There are some types of debts that almost always require discussing the option of filing for bankruptcy. For example, if you are behind on your mortgage payments and your house is threatened with foreclosure, filing for bankruptcy is a viable option. It is often advisable to file for bankruptcy before the foreclosure process begins because you could incur additional attorney fees and other court costs if your lender proceeds with a foreclosure. In this situation, it is usually preferable to file with less debt than more as you will be required to pay what you owe through bankruptcy if you want to keep your home.

Many people have more than one secured loan. If you miss a car payment, your lender has the right to repossess your car. Filing for bankruptcy could stop a repossession from happening and, in some cases, require a lender to return a repossessed car. While the total debt might not be much, filing for bankruptcy might be a more economical option than purchasing a new vehicle.

When faced with losing your property, filing Chapter 13 is often the best available option. Our Chapter 13 bankruptcy attorneys understand that you will have questions and concerns about how bankruptcy will help you and negatively impact your credit going forward. Part of our initial consultation process is providing you the information your need to make an informed decision based on your situation.

Other Considerations When Filing for Bankruptcy

Just because your debt is unsecured does not mean your creditors do not have rights. If a creditor files a lawsuit against you and obtains a judgment, they could potentially garnish your wages or freeze your bank account. Another thing to consider is that paying tax debt off through bankruptcy is more cost-effective than working directly with the state of the Internal Revenue Service.

It is also important to understand that not every debt is dischargeable in bankruptcy. If you owe back child support, alimony, certain taxes, or criminal restitution, you will not be able to eliminate your obligations by filing for bankruptcy. For many people, the student loan crisis is real. However, discharging student loan debt is very difficult. Nonetheless, you should still speak with our bankruptcy lawyers to discuss your circumstances and options.

Just because the above debts are not dischargeable does not mean you should not consider filing for bankruptcy. For example, even though you might not eliminate the debt, you could lower your student loan payments for five years while you try to get yourself into a more favorable financial position. Additionally, by eliminating dischargeable debts, you will free up money to pay the obligations you cannot discharge.

Our Experienced Bankruptcy Attorneys Provide Guidance and Advice

At The Bankruptcy Group, we know that most people have many questions, misconceptions, and fears regarding bankruptcy. Our attorneys and staff are steadfast in our desire to help individuals feeling financially overwhelmed find solutions tailored for their needs. Call 888-710-4334 to schedule a free consultation.