What Are the Requirements for Filing for Bankruptcy?

Almost any person in the United States can file for bankruptcy, but there are some steps you must take to affirm your eligibility. For example, if you are filing for Chapter 7 bankruptcy, you must pass the “means test” to determine your disposable income. If you do not pass the means test because your income is above the median income in your state, you may still be eligible for Chapter 13 bankruptcy.

Everyone who files for bankruptcy must complete credit counseling, as well.

How Much Debt Do You Have to Have Before You Can File for Bankruptcy?

U.S. bankruptcy laws do not require people to have a minimum amount of debt to file for bankruptcy. Instead, bankruptcy becomes a viable option when you can no longer manage your debts. For some, unmanageable debt looks like a few maxed-out credit cards. For others, it may look like an underwater business.

When you file for bankruptcy, the court takes a close look at your financial situation. If the court determines you can pay off your debts without filing for bankruptcy, it may suggest an alternative.

There are many alternatives to filing for bankruptcy, and the decision of whether to file bankruptcy is entirely up to you. Discussing your case with a lawyer can help you make the right choice.

Time Limits for Bankruptcy

If you have filed for bankruptcy in the last 6 to 8 years, you may be unable to file for bankruptcy again. You must also complete a credit counseling course offered by an approved credit counseling agency 180 days before filing for bankruptcy. If the court tossed out your first bankruptcy case, you must wait 181 days before filing again.

Why Would a Judge Throw Out a Bankruptcy Case?

While there are no minimum debts for bankruptcy cases, there are debt limits. In Chapter 13 bankruptcies, for instance, filers may not have more than $419,275 in unsecured debts (credit card bills, medical bills, etc.) and $1,257,850 in secured debts (debts tied to an asset, like a car or home).

Additionally, bankruptcy courts will not approve cases they believe are abusive or fraudulent. An example of a fraudulent bankruptcy case would be an individual maxing out several credit cards in rapid succession with no intention of paying back the debts.

Someone could also try to abuse the bankruptcy system by filing for bankruptcy even though they have the means to pay off their debts.

When Should You File for Bankruptcy?

Everyone has a different financial situation, but there are some universal signs that bankruptcy may be a viable option.

You should consider filing for bankruptcy if:

  • You make less than the average income in your state
  • You spend most or all of your money on bills and necessary expenses (you have little to no disposable income)
  • Your debts are more than half your annual income
  • Even if you took extreme measures (like skipping meals), you could not pay off your debt in 5 years
  • Your debt is causing extreme stress and having a negative impact on your health and relationships

No one should have to spend their lives dodging calls from creditors for debts they simply cannot pay. If the situation we’ve described above sounds familiar, consider filing for bankruptcy and getting a fresh start.

Once again, speaking to an attorney can help you decide if filing for bankruptcy is the best choice for you. With over 150 years of combined experience, our team at Busch, Reed, Jones & Leeper, P.C. can advise you of your rights and legal options during a consultation.

If you’re considering filing for bankruptcy, please call us at (770) 629-0154 or contact us online today.