Pressing debt may leave you with few options for how to move forward financially. Mounting bills often leave families deciding between waiting for action from collectors, cutting a deal with creditors or filing for bankruptcy for a fresh start.
Be aware that bankruptcy is an involved process that requires more than a simple form and has multiple eligibility requirements. Discover whether a minimum debt limit is part of the conditions for declaring bankruptcy.
No minimum limit for bankruptcy
Bankruptcy filings rose by 10% in 2023, meaning more people are taking advantage of this legal tool to handle overwhelming financial struggles. Fortunately, bankruptcy does not require a minimum debt amount but depends on your circumstances.
Various factors, such as your ability to repay debts, creditors’ cooperation and the types of debts you have, influence the decision. Bankruptcy might be sensible if your debt is unmanageable, creditors are uncooperative or certain debts burden you to an excess.
This legal route can provide relief and a chance for financial recovery. However, you have to determine whether your situation calls for a Chapter 7 or 13 filing.
Eligibility for Chapter 7
To qualify for Chapter 7 bankruptcy, you must meet certain criteria. For example, your income should be below the state’s median. Further, the means test compares your income to expenses and determines if you have sufficient disposable income to repay debts.
If your income falls below this threshold, Chapter 7 may be an option. However, some individuals may not qualify if their situation suggests the ability to repay debts through Chapter 13.
Eligibility for Chapter 13
Chapter 13 bankruptcy eligibility involves having a reliable source of income to create a repayment plan. This chapter is for those who can commit to a court-approved plan to repay creditors over 3 to 5 years. Also, if your total debt is below $2,750,000, you may meet the criteria.
This chapter is suitable for individuals with steady income seeking a structured approach to settling debts. Chapter 13 may allow you to keep more assets while working towards financial recovery.
Bankruptcy can be a new beginning for people of all income levels. Reviewing your circumstances helps you decide if bankruptcy is a viable option and which chapter is right for you.