There is no minimum amount of debt you must have in order to file for bankruptcy relief. While the amount of your debt is an important factor to consider, there are other more important factors to take into account in determining if a bankruptcy filing is in your best interest. These include:
Before you file for bankruptcy relief, consider how much income you have and whether you can afford to pay back your debts. If your income is high enough to pay back your debts, you may not qualify for Chapter 7 bankruptcy or you may have to pay back a significant portion of your unsecured debts in Chapter 13 bankruptcy. (visit our Bankruptcy area to learn how Chapter 7 and Chapter 13 bankruptcy work.)
If you don’t have a lot of debt and you have sufficient income to pay back your obligations, it may be in your best interest to delay filing for bankruptcy until when you really need it. There are limits to how often you can receive a discharge in bankruptcy. If you file to eliminate a small amount of debt you can easily pay off, you may not be entitled to another discharge for many years.
You may not have to resort to bankruptcy if your creditors are willing to work with you. If you can settle your debts outside of bankruptcy, you may not need to file. But if your creditors are suing you, garnishing your wages, or trying to foreclose on or repossess your property, filing for bankruptcy may be your best option to stop the collection activities.
To learn more about ways to deal with your debts outside of bankruptcy, see our Bankruptcy Alternatives topic.
Filing for bankruptcy doesn’t wipe out all types of debt. Obligations you can’t eliminate with a bankruptcy discharge are called nondischargeable debts. The most common nondischargeable debts include:
If most of your debts are nondischargeable, filing for Chapter 7 bankruptcy will not help you. But you may be able to pay off your nondischargeable debts in Chapter 13 bankruptcy through a three to five-year repayment plan. (To learn more about how Chapter 13 bankruptcy can help you reorganize your debts, see our topic area on Chapter 13 Bankruptcy.)
Regardless of the amount of debt you have, filing for bankruptcy is an individual decision that depends on your particular circumstances. In general, filing for bankruptcy relief may be in your best interest if: