What is the Minimum Debt Required for Bankruptcy?
There is no minimum debt required to file for bankruptcy. Since bankruptcy is a consumer protection program, designed to protect all consumers, the amount of debt required to file for bankruptcy is relative to a person’s ability to pay their debts, or relative to the consumer. Folks have successfully filed for bankruptcy that were in debt for a few thousand dollars and others have filed that were in debt for millions of dollars. Just because a person’s debt may seem minimal to most of us, it is the fact that the person can’t manage to pay off their debt that is the main deciding factor in bankruptcy cases.
Low income families that live below the poverty line have just as much trouble paying off their debts as Wall Street investors who made one too many bad decisions. In both of these cases a person may find themselves living paycheck to paycheck and slowly drowning in higher and higher debts. Each case has a very high chance of successfully filing for bankruptcy.
While it is true that a person will need to have a clear picture of all of their debts before filing for bankruptcy, no person should worry that they “don’t have enough debt” to successfully file.
When filing for bankruptcy a person will have to show why they don’t think they can pay their debts. Common reasons include unemployment, divorce, and extreme family emergencies. For low income individuals, sometimes just emergency car repairs will be enough to push them to the point of considering bankruptcy.
Even though there is no minimum amount of debt required to file for bankruptcy, making the decision to file is a rather big decision that should be thought through fully. Never rush in to a bankruptcy as an easy way out. A person who is thinking of filing for bankruptcy should do what they can to handle their debts through programs like debt modification or consolidation. On the same note, nobody can make the decision to file for someone else, so, if time is of the essence, or if bankruptcy is seen as the only last option, it is a step that should be taken no matter what amount of debt a person has. Much like any other program, a bankruptcy is useless unless a person makes the attempt to use it.
The good thing about the bankruptcy program not requiring a minimum amount of debt is that the credit system is less likely become inflated by abuse from folks digging themselves deeper and deeper into debt just to make the minimum cut off. Folks can make some pretty rash decisions in moments of desperation, but digging oneself deeper into debt as a strategy of getting out of debt is a decision that is counter productive and can have severe consequences. In the event that a person is approved for bankruptcy but still required to pay back a portion of their debts, that person will be met with a higher settlement amount as the amount of their debt increases. More debt equals a higher settlement unless a person requests a complete discharge of their debts, not requiring them to pay back any at all.