There is no minimum amount of debt required to file bankruptcy. While it may make no logical sense to pay a bankruptcy attorney to file a case when there is very little debt, there is no floor of debt required to file.
The first qualification is that you may have too much debt to qualify for certain chapters of bankruptcy.
In chapter 13, there are two separate debt limits, either of which could disqualify you from filing.
If you have more than $360,475 in unsecured debt, you cannot file chapter 13. Unsecured debt is generally: credit cards, medical bills, and personal loans that aren’t secured by property. But many people forget student loans and tax debt in that amount.
If you have more than $1,081,400 in secured debt, you cannot file chapter 13. Secured debt is generally: car loans, mortgage loans, boat loans, etc. Secured debt is money owed that if you don’t pay the loan, the creditor has some sort of collateral for the loan.
The secured debt limit is the one that may present a problem. With the real estate meltdown, some people own multiple properties with multiple loans. Sometimes this puts people over the secured debt limit and prevents them from filing a chapter 13.
Chapter 7 has no debt limits. You could owe more money than the federal government and still be eligible to file chapter 7.
The amount of income you and your spouse make is the second qualification to determine which chapter you may file.
This one is easy for chapter 13. There is no income limitation in chapter 13. You can earn millions and still file chapter 13.
Chapter 7 is the harder one and is determined by two tests. First is the means test and second is your current monthly income and expenses going forward in time.
The means test is basically a formula that compares your household to the average household of the same size in Florida. So if you have 4 people in your family, they will compare your income and expenses to the “average” family of 4 in Florida.
Just because you make more money than that “average” family does not mean you don’t qualify for chapter 7. If you have large mortgage payments, car payments, or court ordered payments, this may qualify you for chapter 7.
Once you pass the means test, the second formula is to see if your current monthly income and current monthly expenses, after shedding unsecured debt and secured debt you are not keeping, leaves you too much disposable income. If it does, you may not be able to file chapter 7.
Those are the two main chapters of bankruptcy in a nutshell. It is extremely rare for someone to need a Chapter 12 (family farmers and fishermen) or Chapter 11 (major corporations and people over the chapter 13 debt limits).
Call 407-749-0080 now for a free consultation to see how I may be able to help you shed your debt before 2011.