You don't need a particular amount before filing for bankruptcy. Having a minimum requirement might encourage people to go deeper into debt, and that's not something bankruptcy courts would want to do. Ultimately, it's up to you to decide if bankruptcy will be worthwhile.
If you're not sure, answering these questions might help:
If you decide bankruptcy is a good choice, consider taking our quick ten-question bankruptcy quiz. It can help you spot potential bankruptcy issues fast.
Not all debt goes away in bankruptcy. Finding out how much you can wipe out (discharge) should be your first step. In both Chapters 7 and 13, dischargeable debt includes:
But this isn't a complete list. And it's actually easier to learn which debts you can't discharge in bankruptcy.
Most attorneys won't accept a Chapter 7 bankruptcy client with less than $10,000 in dischargeable debt. Anything less and the court might question whether bankruptcy would be in the filer's best interests.
It's because bankruptcy comes with serious consequences. For instance, bankruptcy will:
But $10,000 is an amount that can be hard to pay back, which is why bankruptcy lawyers informally accept it as a reasonable benchmark.
Ultimately, it's up to you. If you're on the fence—or even if you're not—consider the following questions:
Chapter 13 bankruptcy doesn't have a minimum debt amount, but it does have debt maximums. If your secured and unsecured debt exceeds the limits, you won't qualify. You'll need to file an individual Chapter 11 instead. You'll find current amounts in Chapter 11 vs. Chapter 13 Bankruptcy.
Most people don't file Chapter 13 for the sole purpose of wiping out debt unless they don't qualify for Chapter 7. Otherwise, Chapter 13 works best if you have a problem Chapter 7 can't fix, such as stopping a foreclosure or repossession permanently. You can also pay off nondischargeable debts, such as support arrearages or new tax debt, over time using Chapter 13's repayment plan.
Bankruptcy is an unusual area of law because it's essentially a qualification process. The laws provide instructions for completing a 50- to 60-page bankruptcy petition, and because all rules apply in every case, you can't skip a step.
One way to keep track of your research is to use the bankruptcy forms as an outline. You'll find links to related bankruptcy forms and other exemption resources in the chart below. You can also look at the list of Chapter 7 and 13 bankruptcy forms to see where this topic fits in the bankruptcy scheme. And this handy bankruptcy document checklist will help you gather the things you'll need to complete the petition.
More Bankruptcy Information
We want to help you find the answers you need. Go to TheBankruptcySite for more easy-to-understand bankruptcy articles, or consider buying a self-help book like The New Bankruptcy by Attorney Cara O'Neill.
We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by consulting with a local bankruptcy lawyer.