How Much Debt Should You Have Before Filing Bankruptcy?
Bankruptcy is a powerful tool for people dealing with debt. Bankruptcy can offer relief from debt and allow people to start over financially. However, the decision to file for bankruptcy should not be taken lightly. Despite its benefits, bankruptcy is not always the right option. Understanding whether bankruptcy is right for you is vital for ensuring it serves its intended purpose effectively and doesn’t cause additional complications. A question some people ask when they are considering bankruptcy is how much debt they need to have before filing.
So, how much debt should you have before filing for bankruptcy? There are no hard and fast rules for how much debt you should have before filing for bankruptcy. In other words, there isn’t a specific threshold of debt that automatically necessitates filing for bankruptcy. There isn’t a maximum or minimum amount needed to file for bankruptcy. Some people file for bankruptcy with tens of thousands in debt, while others file with hundreds of thousands in debt. Several factors beyond the sheer amount of debt influence the decision to file for bankruptcy.
Signs It Might Be Time To Consider Filing for Bankruptcy
When considering filing for bankruptcy, it is crucial to assess your overall situation. While there isn’t a specific amount of debt you need to have in order to file for bankruptcy, several signs can indicate that it might be time to consider bankruptcy. The following are some of the signs it might be time to consider bankruptcy;
- Unmanageable debt levels: If your debts have reached a point where they significantly exceed your ability to pay them back within a reasonable amount of time, or you’re struggling to make minimum payments, it might be time to consider bankruptcy.
- Regularly missing payments: If you are regularly missing payments, it is a sign that your financial situation is unsustainable. It may be a sign that you should consider bankruptcy. Missed payments can lead to serious consequences like collections, lawsuits, wage garnishment, foreclosure, and repossession.
- You’re incurring new debt to pay old debt: If you’re taking on new loans or using credit cards to pay old debts, you are in a debt cycle. This can signify a financial problem that can be resolved through bankruptcy.
- You’re facing legal action: If you’re facing wage garnishment, repossession, foreclosure, or lawsuits, bankruptcy can offer relief by stopping these actions and discharging or re-arranging your debts.
- Exhausted financial resources: Have you depleted your savings and other financial resources and still can’t manage your debt? This may be a sign it might be time to consider filing for bankruptcy.
Types of Bankruptcy
Two main types of bankruptcies are available for individuals in the U.S.:
- Chapter 7 bankruptcy: This option involves selling non-exempt assets to pay off creditors. In return, most unsecured debts like medical bills and credit card debt are discharged.
- Chapter 13 bankruptcy: This option allows you to keep your assets and repay all or part of your debts over a period of three to five years.
Contact Us for Legal Help
If you need help determining if bankruptcy is the right option for you or getting started with filing, contact our skilled Deerfield Beach bankruptcy lawyer at the Law Office of Adam I. Skolnik, P.A.
