How much debt do you have to have to declare bankruptcy?

10628297 - past due notice showing only a few dollars and change available.As debts begin to pile, the increasing pressure gets harder to bear. People in this situation begin to think about filing for bankruptcy, especially if other debt-relief options will not ameliorate their condition. One question that comes up at the stage is if they’re in enough debt to justify a bankruptcy. In other words, how much debt do you need to have to declare bankruptcy?

The answer is quite simple but equally nuanced.

Based on bankruptcy laws, there is no minimum debt amount debtors have to have before they can file for bankruptcy. While the amount of debt is an important factor for qualifying for bankruptcy, other factors come into play. Some of which includes:

  • Your ability to repay your debt outside of bankruptcy.
  • The creditors’ willingness to work with you.
  • Whether your debts are dis-chargeable under bankruptcy.
  • The facts of your case.

Types of Personal Bankruptcy

There are two types of personal bankruptcy: Chapter 7 and Chapter 13.

Chapter 7

Under Chapter 7 bankruptcy, you can have all or parts of your debts discharged after your liquid assets are used to repay some of the debt. Liquid assets are your possessions that can easily be converted to cash. However, only your ‘non-exempt’ assets can be turned over to the court.

Before you can qualify for a Chapter 7 bankruptcy, you have to prove that your income is less than the median income for your family size in your state. This is determined through the ‘Means Test.’ Moreover, you must receive credit counseling from an approved credit counseling agency.

Chapter 13

Under Chapter 13, you’ll have to repay part or all of debt through a 3 to 5 years repayment plan. Any debt that isn’t covered in the repayment plan is discharged, meaning you don’t have to pay them back again.

You can file for a Chapter 13 bankruptcy provided your unsecured debt is less than $419,275 and your secured debt is less than $1,258,850.

Debts That Can’t Be Discharged in Bankruptcy

Under Chapter 7 bankruptcy, all outstanding debts after your ‘non-exempt’ assets have been liquidated to pay off creditors will be forgiven. However, there are some non-dischargeable debts. Some of which include:

  • Student loans
  • Alimony
  • Child support
  • Back taxes
  • Homeowner Association Fees
  • Court fees and penalties
  • Unsecured debts that were omitted from your filing
  • Personal injury debts owed due to an accident while you were intoxicated.

Factors To Consider Before Filing For Bankruptcy

Timing is everything, even when it comes to bankruptcy. Filing for bankruptcy should be determined but not only by your incurred debt but also by the surrounding circumstances. Here are some of the important factors to bear in mind.

Unsecured Debts

Unsecured debts are debts that are not backed with collateral. Some examples include credit card debts, medical bills, and cash advance (payday) loans. There is no minimum amount of unsecured debt required before filing for bankruptcy.

Secured Debts

Mortgage and auto loans are usually backed by the property itself. As long as you’re willing to make back payments for them, you will be able to keep them when you file for bankruptcy. Repayment will be made at a decreased interest rate.

Employment Situation

If you’re unemployed, keeping up with your payments is impossible. Declaring bankruptcy can help you get rid of your unsecured debts, enabling you to focus on catching your secured debt payments. Similarly, even if you have a job but you’re still unable to meet your debt obligations, filing for bankruptcy can help you retain your house and car, and either pay part of or eliminate your unsecured debts.

Associated Costs

Ironically, filing for bankruptcy isn’t free. The total filing fee for Chapter 7 is $335, while Chapter 13 costs $310. Similarly, you’ll have to pay for the credit education courses you’d be required to take. Finally, navigating the process of bankruptcy should always be done with an attorney, which can cost anywhere from $500 to $2,200.

When To File For Bankruptcy

You now know that there’s no fixed amount of debts to have before filing for bankruptcy. However, certain signs may indicate when bankruptcy is the best course of action.

Inability to pay back.

If the total debt you owe is more than half of your annual income, or if you see that there’s absolutely no way to repay your debts within 5 years even if you take extreme measures, then bankruptcy may be right for you.

To qualify for Chapter 7 bankruptcy, you also have to pass the Means Test, wherein your income will be compared with other families within your state.

Disturbance from creditors

If you’re unable to restructure your loan with your creditors and they’re trying to sue you, garnish your wages, or repossess/foreclosure on your property, you may file for bankruptcy. Filing for bankruptcy will place a ‘temporary stop’, meaning creditors will have to suspend all collection activities.

Filing History requirement

If you’ve filed for bankruptcy in the past, you may be unable to file for another bankruptcy discharge until after a certain time has passed. This period is determined by the type of bankruptcy you filed before and the surrounding circumstances.


As you’ve seen, there’s no specific amount of debt you need to file for bankruptcy, although there’s a maximum amount if you’re considering to file under Chapter 13. However, some indications can guide you in knowing when bankruptcy may be right and we’ve explored some of them. Know that other debt-relief options – like debt management plan, debt consolidation, and debt settlement – should be considered before filing for bankruptcy.

Declaring bankruptcy is a deeply emotional process, considering it becomes public record and the societal stigma associated with it. Moreover, it will greatly impact your credit score and will remain in your credit report for up to 10 years (for Chapter 7) or 7 years (for Chapter 13).

We’re here to help. Contact us today for more information!

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