How Much Debt Do You Have to Have to File Bankruptcy?

Bankruptcy doesn’t have a minimum debt requirement—you’ll decide whether filing makes sense for you.

By , Attorney

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:

  • How much debt will bankruptcy erase?
  • Can I afford to pay back my debts?
  • Can I negotiate with creditors to pay less?
  • Have I reached out to a credit counseling agency?

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.

How Much Debt Can You Erase in Bankruptcy?

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:

  • credit card balances
  • medical bills
  • back rent or utility payments
  • personal loans
  • car leases, and
  • gym memberships.

But this isn't a complete list. And it's actually easier to learn which debts you can't discharge in bankruptcy.

How Much Debt You Should Have in Chapter 7 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:

  • affect your credit rating for up to ten years
  • prevent you from qualifying for another discharge for years to come, and
  • make it harder to finance a home or car, rent a place to live, and open a bank account for some time.

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.

Should You File Chapter 7 Bankruptcy if You Don't Have Much Debt?

Ultimately, it's up to you. If you're on the fence—or even if you're not—consider the following questions:

  • Can you negotiate with creditors to pay less? If you can settle with all of your creditors, it could be a good option. However, keep in mind that you'll be assessed tax on any forgiven amount over $600. By contrast, debt discharged in bankruptcy isn't taxed. (Note: The federal government sometimes waives the taxation requirement during recessionary times. Also, you won't be taxed if you can prove insolvency. Talk with your accountant.)
  • Can you pay back the amount you owe? Many people can pay back $10,000 or less. Even so, exceptions exist. Bankruptcy might offer a quicker way to rehabilitate your credit and fix your finances if you don't think you'll ever be able to repay your debt. Plus, the automatic stay stops collectors.
  • Do you want to work with a credit counseling agency and pay less over time? This approach lets you pay far less in interest and pay off accounts in about five years. However, debt settlement agencies work primarily with major credit card companies, and after you finish paying, you'll have to rebuild your credit. You'd likely get to the same place faster through bankruptcy, and it could cost significantly less.

How Much Debt You Should Have in Chapter 13 Bankruptcy

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.

Navigating Your Bankruptcy Case

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

Bankruptcy Forms

Schedule D: Creditors Who Hold Claims Secured By Property (individuals)

Schedule E/F: Creditors Who Have Unsecured Claims

Related Information

How long before filing for bankruptcy are you supposed to stop using credit cards?

What You Should Know About Filing for Bankruptcy

What Are Some Good Questions To Ask a Bankruptcy Attorney?

Need More Info?

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.

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