How Much Debt is Required to File Bankruptcy?

TRI Writer • April 15, 2022

Many different financial backgrounds and circumstances can lead to bankruptcy. No one’s situation is exactly the same. However, many bankruptcy filers do head to court for similar reasons: job loss, medical debt, and divorce being three of the most common.

How Much Debt is Too Much Debt?

Many potential bankruptcy filers ask the same questions in their initial consultation. One question many ask is how much debt is too much debt? The simple answer is if you’re questioning whether or not you have too much debt, assume you do. And take action to decrease your spending or increase your earnings, and pay off the debt. If the question is more specifically aimed at bankruptcy, it’s time to consider bankruptcy law.

How Much Debt Qualifies You to File for Bankruptcy?

Americans seeking debt relief typically turn to one of two types of bankruptcy: Chapter 7 or Chapter 13. The income and debt requirements vary between the two.

What Are the Income and Debt Requirements to File Chapter 7 Bankruptcy?

In order to qualify to file Chapter 7 bankruptcy, a petitioner’s average monthly income over the previous six months must be lower than the median income for the same-sized household in their state of residence or the petitioner can pass a “means test.” The means test considers income, debt, and expenses to determine whether the disposable income available to a petitioner is high enough to make partial payments to their unsecured creditors. If a petitioner fails the means test, they may still qualify to file Chapter 13 bankruptcy.

What Are the Income and Debt Requirements to File Chapter 13 Bankruptcy?

In order to qualify to file Chapter 13 bankruptcy, your unsecured debts (like credit cards and medical bills) must be less than $419,275, and all secured debts (like a mortgage or a car payment) must be less than $1,257,850. These limits are in effect through April 2022. (Debt limits change every three years). In addition to meeting the debt requirements, the petitioner must have sufficient income to make the monthly debt payments set out in their Chapter 13 bankruptcy plan.

If you have questions about filing Tennessee or Georgia bankruptcy and you aren’t sure if you meet the debt or income requirements, contact an experienced bankruptcy attorney. Don’t hesitate to call Kenneth C. Rannick, P.C., Tennessee, and Georgia bankruptcy attorney. We help good people through bad times.

Can I Keep My Car If I File for Chapter 7 Bankruptcy in Tennessee?

February 17, 2025
Can I Keep My Car If I File for Chapter 7 Bankruptcy in Tennessee?

What Are My Options If I Am Drowning in Credit Card Debt in Tennessee?

February 1, 2025
What Are My Options If I Am Drowning in Credit Card Debt in Tennessee?

What Are the Documents Required to Apply for Chapter 7 Bankruptcy in Tennessee?

November 21, 2024
What Are the Documents Required to Apply for Chapter 7 Bankruptcy in Tennessee?

What is the Difference Between Chapter 7 and Chapter 13 Bankruptcy in Tennessee?

October 29, 2024
What is the Difference Between Chapter 7 and Chapter 13 Bankruptcy in Tennessee?

Understanding Chapter 7 Bankruptcy Qualifications

June 24, 2024
Understanding Chapter 7 Bankruptcy Qualifications

Understanding the Role of the Trustee in Chapter 13 Bankruptcy

April 5, 2024
Understanding the Role of the Trustee in Chapter 13 Bankruptcy

Understanding which Debts can be Discharged in Chapter 7 Bankruptcy

March 27, 2024
Understanding which Debts can be Discharged in Chapter 7 Bankruptcy

Protecting Your Assets in Chapter 7 Bankruptcy

February 19, 2024
Protecting Your Assets in Chapter 7 Bankruptcy

Subchapter 5 Bankruptcy: Unlocking New Possibilities for Tennessee Residents

January 30, 2024
Are you a Tennessee resident facing financial challenges and considering bankruptcy? If so, you may have heard about a relatively new option called Subchapter 5 bankruptcy. But what exactly is Subchapter 5 and how does it differ from traditional Chapter 11 bankruptcy? More importantly, what benefits does it offer to individuals and small businesses?  In this blog post, we will explore the world of Subchapter 5 bankruptcy and shed light on its advantages for Tennessee residents. Whether you're a struggling entrepreneur or an individual burdened by overwhelming debt, understanding the potential benefits of Subchapter 5 can help you make informed decisions about your financial future. What is Subchapter 5 Bankruptcy? Subchapter 5 is a relatively recent addition to the United States Bankruptcy Code, specifically designed to provide a streamlined and cost-effective bankruptcy process for small businesses and individuals. It was created as part of the Small Business Reorganization Act (SBRA) in 2019, with the aim of increasing accessibility to Chapter 11 bankruptcy relief. The Benefits of Subchapter 5 Bankruptcy Simplified Process: One of the key advantages of Subchapter 5 is its simplified and faster bankruptcy process. Unlike traditional Chapter 11 bankruptcy, which can be complex and costly, Subchapter 5 offers a more streamlined approach that is better suited for small businesses and individuals. Retention of Ownership: Under Subchapter 5, business owners have the opportunity to retain ownership and control of their company while developing a repayment plan. This allows for greater flexibility and the ability to restructure debts without losing ownership interests. Reduced Plan Requirements: Subchapter 5 eliminates certain stringent plan requirements that are typically associated with traditional Chapter 11 bankruptcy. This simplification of the plan process makes it more accessible to small businesses and individuals. Debt Repayment Plan: Subchapter 5 allows for the development of a debt repayment plan based on the individual's or small business's disposable income. This plan spans over three to five years, making it more manageable and achievable for debtors. Creditor-Friendly Approach: Subchapter 5 encourages creditor participation and collaboration, promoting consensual resolutions and a more amicable environment. This can lead to increased cooperation, reduced litigation costs, and ultimately, a more successful restructuring process. Subchapter 5 vs. Chapter 11 Bankruptcy: Understanding the Difference While both Subchapter 5 bankruptcy and traditional Chapter 11 bankruptcy share some similarities, there are significant differences between the two. The primary distinction lies in the complexity, cost, and requirements associated with each option. Subchapter 5 offers a more simplified and accessible bankruptcy process specifically tailored to the needs of small businesses and individuals, while Chapter 11 is better suited for larger businesses with more complex financial structures. If you're a Tennessee resident grappling with financial difficulties, Subchapter 5 bankruptcy may provide a viable solution. Its streamlined process, reduced plan requirements, and debtor-friendly approach make it an attractive option for small businesses and individuals seeking relief from overwhelming debt. Before making any decisions, it's essential to consult with a qualified bankruptcy attorney who can guide you through the process and help determine the best course of action for your specific situation. Remember, bankruptcy is not a one-size-fits-all solution, and the outcome will depend on various factors. However, understanding the potential benefits of Subchapter 5 bankruptcy can empower you to make informed decisions about your financial future. At Kenneth C. Rannick, P.C., we specialize in bankruptcy law and can provide the guidance and support you need during challenging times. Contact us today to schedule a consultation and explore your options for a fresh start. Take control of your financial future with Subchapter 5 bankruptcy. Let us help you navigate the path to a brighter tomorrow.

A Comprehensive Guide to How Chapter 11 Bankruptcy Works in Minnesota

December 21, 2023
Filing for bankruptcy can be a scary and confusing decision, but it is a necessary step for individuals and businesses who are struggling with their finances. In Minnesota, one of the most common types of bankruptcy is Chapter 11 bankruptcy, which allows a business to reorganize its debts and continue operating while paying off its creditors. If you're considering Chapter 11 bankruptcy, it's important to understand how it works and what benefits it can offer. In this post, we'll delve into the process of filing for Chapter 11 bankruptcy, highlight its advantages, and discuss how you can get started.  1. Understanding Chapter 11 Bankruptcy Chapter 11 bankruptcy is a form of bankruptcy that allows businesses to reorganize their debts while continuing to operate. The goal of this process is to give businesses a chance to become profitable again by restructuring their debt payments. During Chapter 11 bankruptcy, a business is protected from creditors by an automatic stay that prevents them from pursuing collection activities. The debtor then works with a bankruptcy court and creditors to create a repayment plan that will allow them to pay off their debts over time. 2. Benefits of Chapter 11 Bankruptcy There are several benefits to filing for Chapter 11 bankruptcy. One of the primary benefits is that it allows the debtor to maintain control of their business operations while repaying their debts. This means that the debtor can continue to generate revenue and will not be forced to liquidate their assets to pay off their creditors. Additionally, Chapter 11 bankruptcy can give the debtor more time to negotiate with their creditors and reach a repayment agreement that is more favorable to them. 3. How to File for Chapter 11 Bankruptcy Filing for Chapter 11 bankruptcy can be a complex and time-consuming process, but it is possible with the help of a knowledgeable bankruptcy attorney. The first step is to file a petition with the bankruptcy court, which will initiate the automatic stay and prevent creditors from taking any further collection actions. Next, the debtor will need to provide the court with a comprehensive list of their assets, liabilities, and creditors. From there, the debtor will work with their attorney to create a repayment plan that is feasible and fair to all parties involved. 4. Working with a Bankruptcy Attorney Filing for Chapter 11 bankruptcy can be an overwhelming process, and it is important to work with a qualified bankruptcy attorney who can guide you through the process. A bankruptcy attorney can help you prepare and file the necessary paperwork, negotiate with creditors on your behalf, and create a repayment plan that is tailored to your unique financial situation. Additionally, an attorney can give you advice on how to protect your assets and maintain control of your business operations during the bankruptcy process. Filing for Chapter 11 bankruptcy can be a complicated and stressful process, but it can also be a valuable tool for businesses that are struggling with their finances. By reorganizing their debts and negotiating with creditors, businesses can get a fresh start and work towards profitability once again. If you're considering filing for Chapter 11 bankruptcy in Minnesota, it's important to work with a qualified attorney who can guide you through the process and help you achieve the best outcome.
More Posts
Share by: