Minimum Debt for Filing Bankruptcy
A Chapter 7 bankruptcy case can be a great thing for those who have been weighed down by tons of credit card debt. People facing foreclosure, heavy medical bills, and other creditors, can benefit from a Chapter 7 bankruptcy filing.
But before you go to a bankruptcy attorney and begin the process of discharging your debts, you need to know one thing – how much debt do I need to file? Knowing your options is always essential.
How Much Debt Do I Need for Chapter 7?
No minimum debt is required to file for bankruptcy protection. While the sum of your debt is vital, there are more elements to consider when evaluating if bankruptcy is in your best interest. These include the following:
Can you afford to pay your expenses?
The most important lesson from bankruptcy is to avoid having your bills bigger than your means.
Many debts come from buying things you don’t need with money you don’t have. Buying things you don’t need with money you don’t have is the definition of bankruptcy.
If you are in debt, you probably have more bills than you have money. You have two choices:
1) Use the money you have to pay off your debts,
2) Expect to go bankrupt.
If you are in debt, you probably shouldn’t have bought anything with the money you borrowed. If you have money, you should be using it to pay off your debts.
But that is not enough. You should keep careful track of your debts. You need to be able to prove they are there.
Are you capable of resolving your debts outside of bankruptcy?
If you get behind on your payments, call your creditors and explain that you just can’t make it.
Most creditors will work with you. But here are four things to remember.
- Don’t get behind again. Even if you call your creditors and they promise to forgive your missed payments, it’s not as good as paying, and they can easily change their minds.
- If you get behind again, don’t expect them to forgive you.
- Don’t expect your creditors to help you. They don’t owe you anything.
- Don’t expect your creditors to trust you. They don’t want to forgive your missed payments. They want their money.
If you have a little debt load and enough money to meet your responsibilities, it will be to your most significant advantage to postpone filing for bankruptcy till you truly need it.
There are limitations on how frequently you may get a bankruptcy discharge. If you file for bankruptcy to discharge a minor amount of debt that you can quickly repay, you may be ineligible for another discharge for several terms.
What kinds of debts do you have?
Filling for bankruptcy does not eliminate all debt. Nondischargeable debts are obligations that you cannot discharge in bankruptcy. The most often seen unpayable debts are as follows:
- Support payments
- Priority tax
- Student loans
If the majority of your obligations are uncollectable, Chapter 7 bankruptcy will be ineffective. However, you may be able to repay your unpayable debts via a three- to five-year repayment plan under Chapter 13 bankruptcy.
How is your financial situation?
Bankruptcy isn’t the cure for all debt problems. It is best in your situation if:
- You’re a young and eager entrepreneur, and you want to start a company.
- Your company is going to be a huge success.
- Your business model is so new that nobody has seen anything like it.
Those are good bets, and it would be great to lose everything. But, if you win, you also win big. But things don’t work out that way for most people.
- Maybe you’re a middle-aged housewife, and you’re desperate for money.
- Maybe you’ve lost your job, or you’re sick, or you’re facing a huge mortgage.
- Maybe you’re raising a family, and you need the money.
When Bankruptcy Chapter 7 Might Be a Wise Decision
Before filing for Chapter 7 bankruptcy, you should determine if it makes financial sense. Chapter 7 bankruptcy may suit you if you ask yourself the following questions:
- Are you suing for damages?
- Are creditors legally prohibited from seizing your property or income regardless of filing for Chapter 7 bankruptcy?
- Is Chapter 7 bankruptcy going to discharge enough of your debt to justify your time and effort?
- Will you be forced to give up property that you want to preserve?
Depending on your responses to these concerns, you may discover that Chapter 7 bankruptcy is unlikely to benefit you or that it is a reasonable solution for you.
The Step-by-Step Guide to Filing Chapter 7 Bankruptcy
Gather Your Papers
The initial step is to gather all financial records to assess your present financial situation.
Get a free credit report first. Each of the three credit agencies is entitled to one free report each year. However, they may not mention some of your debts.
Medical expenses, personal loans, payday loans, and tax obligations are examples. Make a note of any debts that aren’t on your credit report, so you don’t have to search them up while filing for bankruptcy.
Anyone filing for bankruptcy must complete a credit counseling course six months before filing. Both Chapter 7 and Chapter 13 situations demand this. You must take the course via a Department of Justice-approved credit counseling service.
The course ends with a certificate.
File Bankruptcy Forms.
The bankruptcy paperwork includes over 70 pages and at least 23 forms. These questions are on the bankruptcy filings. You’ll also mention your bankruptcy type and if you’re working with a lawyer.
A Chapter 7 bankruptcy costs $338 to file in federal court. This is usually payable when the bankruptcy petition is filed.
If you can’t afford the filing cost now, you may request to pay it in installments once your case is filed. You may request four monthly payments.
Print Bankruptcy Forms.
After preparing your bankruptcy paperwork, you must print them for court. Print them one-sided. No double-sided papers in court. You must also sign the printed forms like:
- Petitions, including any local forms
- Certified Credit Counseling
Filing Bankruptcy Forms in Court.
When you enter your local courtroom, security officers will ask you to go through a metal detector. After passing security, head to the clerk’s office and tell them you’re there to declare bankruptcy. They will take your bankruptcy paperwork and cost (or application for a waiver or pay the fee in installments).
The clerk will then return you to the front desk and provide you:
- Your case number
- Your bankruptcy trustee’s name
- Date, time, and place of your trustee meeting (also known as a “341 meeting”).
Your case has now been filed! But wait, there’s more! – you still need to file for Chapter 7 bankruptcy to make a new start!
Email Trustee Documents.
The court-appointed Chapter 7 trustee manages your case and liquidates nonexempt assets for your creditors. A bankruptcy trustee is required in both Chapter 7 and Chapter 13 proceedings.
Pay attention to the trustee’s letter after submitting your complaint. The trustee will write to you requesting tax returns, pay stubs, and bank statements. You may not secure a debt discharge if you do not provide the trustee with the needed paperwork.
Pass a Bankruptcy Course!
You must enroll on a Debtor Education Course from an accredited credit counseling firm after declaring bankruptcy. It takes at least 2 hours to complete online or by phone and costs $10-$50 unless you qualify for a waiver.
Attend 341 Meetings.
A month after filing, your 341 meeting of creditors will take place. The date, time, and venue of your 341 meetings will be on the court notice you get a few days after filing. Due to the COVID-19 pandemic, all 341 meetings are video-conferenced or phoned.
Let a Wheeling Bankruptcy Attorney Help You Weigh Your Options.
I know that you will conclude that bankruptcy can be a good thing with all the information above, but there is one crucial thing to consider. You need to contact a Wheeling bankruptcy attorney in your area.
Our attorneys can assist you throughout the proceedings and answer all of your questions, especially the question about “How Much Debt Do I Need To File Chapter 7?” Bankruptcy is a very serious thing. If you don’t do it effectively, it can be harmful to your financial life. But if you do, it can help you rebuild your credit and your life.