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.