How Much Debt Is Needed To File For Bankruptcy?
Despite valiant efforts to keep bills paid in full in a timely manner, sometimes debt can creep up and then quickly become overwhelming. Unexpected life events such as a car accident or a prolonged illness may result in high medical bills. Likewise, divorce or other life changes can result in unplanned expenses or skyrocketing credit card debt. For many people, filing for bankruptcy is a sensible option that offers almost immediate relief from harassing debt collection phone calls and a way out from under a growing mountain of debt. Let’s take a look at how much debt is needed to file for bankruptcy.
If you are struggling with debt, bankruptcy is an option you may wish to consider. Contact Sirody & Associates, experienced bankruptcy attorneys, for a free consultation.
Bankruptcy Can Be A Prudent Option
Bankruptcy offers a number of benefits, including the complete eradication of certain types of debt, so it’s a solid option for many people who are overwhelmed with bills. One of the key benefits of filing for bankruptcy is the granting of the “automatic stay”. The automatic stay halts all collections activity from creditors as soon as bankruptcy papers are filed. This means that any and all civil lawsuits as well as communications and activity from collection agencies, government entities and creditors stops immediately. The automatic stay also stops wage garnishment during the time the stay is in place. And, best of all, it can offer bankruptcy filers a chance to make a fresh start financially.
Bankruptcy Eliminates Debts
Depending on the type of bankruptcy – Chapter 7 or Chapter 13 – certain types of debt can be completely eliminated. Chapter 7 bankruptcy offers the possibility of eliminating medical bills, credit card debts, personal loan debts, civil judgments, utility bills, past-due rent or mortgage payments, some business debts and some older tax debts. Commonly discharged debts for a Chapter 13 bankruptcy include personal loans, credit card debts, medical bills, many lawsuit judgements, utility bills and some income tax obligations. An experienced bankruptcy attorney can help determine which type of bankruptcy is appropriate for an individual’s unique situation.
Level Of Debt
Because each person’s financial profile is unique, a particular level of debt that may be overwhelming to one person, may be manageable to another who has access to more assets or additional income sources. Fortunately, bankruptcy laws do not require anyone to have a minimum amount of debt in order to file for bankruptcy. It is important to understand, however, that the law does enforce a ceiling on the amount of debt for Chapter 13 bankruptcy filers. The maximum allowable debt in a Chapter 13 bankruptcy is $419,275 in unsecured debt (e.g. credit card bills, medical bills) and $1,257,850 in secured debt (e.g. mortgages, car loans). There are other factors to consider before opting to file for bankruptcy as well such as:
- How agreeable the creditors are to working with the filer to reach a payment schedule.
- If the filer has the ability to pay his or her debts outside of bankruptcy.
- Whether the types of debt can be discharged with bankruptcy (e.g. student loans are not eligible for discharge).
Experienced Bankruptcy Attorneys Provide Help
Bankruptcy can be a practical option for many people, but especially for those who are being harassed or sued by debt collectors, those who are at risk of losing their home because they can no longer pay their mortgage or those who are taking out loans or liquidating retirement assets to pay off debts. However, filing for bankruptcy is a very complex process. If you are considering filing for bankruptcy in order to relieve financial burdens and would like to explore the option further, our experienced Baltimore bankruptcy attorneys will guide you through the process and help you make a fresh start. Contact us online for a free consultation.