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How Much Debt Do I Need To File For Bankruptcy?

If you have more debt than you can handle, you might be wondering if bankruptcy is the answer and what the requirements are to file a case. There is a lot of information, and misinformation, out there about how bankruptcy works. For instance, you may have heard that you can keep your things without having to pay, but that is not true. Even if bankruptcy, if you want to hang on to your car or house, you have to come to an agreement with the creditor about the payments. If you do not make the payments, you can lose your house or your car. Another good example of some of the misperceptions about bankruptcy is that you have to have a certain amount of debt in order to be eligible to file a case. This might stem from the changes Congress made to the bankruptcy laws in 2005, and while there are inquiries made into your income, you do not have to have a certain amount of debt to be able to file a case.

The thought that a minimum amount of debt must be accumulated before you are allowed to file bankruptcy might come from information about the means test. The means test was put in place in 2005 and depending on the mathematical outcome of this test you might have to file a Chapter 13 instead of a Chapter 7, but you are not prohibited from filing a case at all. It works like this:

• Your total secured debt is looked at in comparison to your income.
• There is a “look back” time frame, and it is this timeframe for which your income is calculated. So if you just received a large bonus that is not normally part of your salary, you might want to wait to file a case until the month in which the bonus was paid falls outside the look back period.
• The threshold figures are different for different geographic regions, so it is best to have a trained bankruptcy professional perform the means test calculation.

If the result in your case is that your income is such that you are eligible for a Chapter 13 instead of a Chapter 7, this means you will be in bankruptcy for up to 5 years rather than for approximately 4 to 6 months. It also means you will have to repay at least a part of your unsecured debt, which is usually made up of debt such as medical bills and credit cards. Most people prefer to file a Chapter 7 because these restrictions are not in place, but the amount of debt you have does not mean you cannot file at all; it just means that when taking a look at that figure in conjunction with your income, you may be “forced” to file a Chapter 13 in order to get relief. If you are having trouble paying your bills, either type of bankruptcy case is helpful. Call us today to learn more.

For more information about how to handle overwhelming debt, contact us at We will help by coming up with solutions that work for you.

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