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  • Writer's pictureDaniel Rodriguez

How Much Debt Do You Need to File for Chapter 13 in California?

There is no minimum debt required to file for Chapter 13 bankruptcy in California. However, the amount of debt you do have is an important factor when considering bankruptcy as an option. How much debt you need to file depends on your circumstances. The experienced attorneys at The Bankruptcy Group will carefully review your situation with you and work to develop a plan moving forward. Below, our Roseville, CA bankruptcy attorney discusses how the amount of debt affects your bankruptcy.

How Do I Know if the Amount of Debt I Have is Enough to File for Chapter 13 Bankruptcy in California?

When someone asks how much debt they need to file for Chapter 13 bankruptcy, what they probably mean is, “do I need to file for bankruptcy with the amount of debt I have?” The answer depends on your situation. If you have one outstanding credit card with a $1,200 balance, then bankruptcy is probably not your best choice. However, if your home is in foreclosure and you have no other debt, bankruptcy is a viable and powerful option. One of the best ways to know if bankruptcy would be beneficial given the amount of debt you have is to sit down and discuss your case with our knowledgeable Roseville bankruptcy attorney, paying close attention to the following questions:

Can You Pay Back Your Debts?

One of the easiest questions to ask yourself is, “can I pay my debts?” If your debt is low enough and your income is sufficient to pay it off, filing for bankruptcy might not be the best solution. However, there are other factors to consider. If paying back your debt jeopardizes paying your current bills, such as your mortgage or utilities, then filing for bankruptcy could allow you to eliminate your debt without significantly sacrificing your ability to provide for yourself or your family.

Can You Work With Your Creditors?

Depending on the amount of your debt, your creditors might work with you. However, there are some drawbacks. Debt forgiveness sounds good on paper, but there are tax consequences. For example, if a credit card company allows you to pay back $5,000 to satisfy a $15,000 debt, you will incur $10,000 of taxable income. This extra income could adversely impact the money you owe the federal government at the end of the year.

In bankruptcy, there are no tax consequences on the discharged debt. Additionally, a creditor might offer a payment plan that appears feasible, but the length and interest could have you paying more than you originally owed. Most people who are struggling financially are only helped in the short term by these types of agreements. A Chapter 13 bankruptcy could allow you to pay back a portion of your debt while eliminating a significant amount of it. Our California Chapter 13 bankruptcy attorney will review the pros and cons of filing for bankruptcy, given the amount of debt you have.

Is Your House in Foreclosure?

As stated above, if your house is in foreclosure or you are behind in your mortgage, any other debt you have is not important. In many cases, stopping a foreclosure on your home requires filing for Chapter 13 bankruptcy. Even if you do not have any other debt, including credit card debt or a personal loan, foreclosure is reason enough to contact our California bankruptcy attorney.

Types of Debt to File for Chapter 13 Bankruptcy for in California

In some cases, the type of debt you owe has more of an impact on your decision to file for bankruptcy than the amount. While you can discharge a wide variety of financial obligations through bankruptcy, there are specific debts that cannot be eliminated.

Some of the most common debts Congress deemed too important to discharge include alimony payments, child support, certain taxes, debts incurred through fraud, the vast majority of student loans, criminal restitution, and personal injury claims arising from driving under the influence.

If this is the only type of debt you have, it is possible to pay it back through a Chapter 13 bankruptcy. One of the benefits of any bankruptcy filed in California is the injunctive protection know as an automatic stay. This legal barrier protects you from any action from your creditors, such as lawsuits and wage garnishments, and allows you to deal with your debt through your bankruptcy. If your debt is nondischargeable, whatever the amount, our California Chapter 13 bankruptcy attorney will help formulate a feasible plan. In some instances, such as some taxes, part of the debt might be dischargeable.

There is a Maximum Debt Limit for Filing for Chapter 13 Bankruptcy in California

A debtor is not limited by a minimum amount of debt when filing for Chapter 13. However, there is a maximum amount of debt allowable. The debt limits for Chapter 13 adjust every three years, with the last change effective April 1, 2019. From 2020 through to 2021, a Chapter 13 debtor has an unsecured debt limit of $419,275 and a secured debt limit of $1,257.850. If a person has several investment properties or other substantial assets they want to keep, they might be required to file a Chapter 11 case.

Call Our California Chapter 13 Bankruptcy Attorney if You Have Questions About the Amount of Debt You Have

People often think of bankruptcy as a last resort. Most people believe if they are making minimum payments or not falling too far behind, they are adequately managing their financial obligations. You do not have to be entirely overwhelmed by debt to benefit from bankruptcy. Our California Chapter 13 bankruptcy attorneys will thoroughly review the amount of your debt and income to help determine if bankruptcy would help you. Call The Bankruptcy Group at 1-800-920-5351 to schedule a free consultation.

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