When people come into our Waldorf or Lexington Park office for a free bankruptcy consultation, there are certain questions they will ask. One of these is “How much debt do you need to have to file for bankruptcy?” The truth is that there is no minimum amount of debt that you are required to have to be eligible to file. The general test to determine if you have enough debt to file for bankruptcy is that you need to show that you are insolvent. That means you can’t afford to pay your bills as they come due. And that even if you sold your assets you couldn’t pay off your debt in full.
This sounds straight forward enough. But it is a bit of a circular if you think about it. To file for bankruptcy you have to be insolvent. But insolvency is just another word for bankruptcy. So to show you have enough debt to file for bankruptcy you have to show that you are bankrupt. But don’t get too worried about this word game, or the question of do you have enough debt to file for bankruptcy. One of the reasons we offer a free bankruptcy consult is that people never want to file for bankruptcy. Because of this they hardly ever look into bankruptcy unless they have enough debt to be able to file. In fact most people have gone further into debt while trying to avoid filing for bankruptcy.
How Do You Determine If You Need To File For Bankruptcy?
There are a few questions that we will look at to determine if you have enough debt to file for bankruptcy. The first question is what is your debt to income ratio? If someone has $10,000 in debt and they are making $20,000 a year, they probably have an insurmountable problem, if they are making $200,000 dollars a year, maybe not so much.
Next we need to ask what is do your expenses exceed income. Here we are going to look to see if you have enough income to pay your basic living expenses. If after you pay these bills you don’t have any money leftover, we probably are going to look at filing a chapter 7 bankruptcy. If you do have some money leftover after paying these bills, we may look at filing a chapter 13. In a Chapter 13 bankruptcy you pay back some or all of your debts over a 3 to 5 year period.
Finally we will look at you assets and non-bankruptcy options. This may include looking to see if you can refinance your debt to a lower interest rate. Or looking to see if you can get lower interest rates by working with a nonprofit financial management company. When looking at these options we want to figure out what will be the quickest way to put these financial problems in the past so you can get on with your life.
Conclusion & Next Steps
There is no minimum amount of debt required to file for bankruptcy. Because of this we need beyond ask several questions to determine if you have enough debt to file bankruptcy. We need to look at your ability to payoff your debt to determine if bankruptcy is the right decision for you. To do this we will need to look at your debt to income and your income to expense ratios. During the free initial consultation we will do a detailed review of your financial situation to help you figure out if you have enough debt and meet the other requirements to file for bankruptcy. We also will help you figure out what is the best option for you. For more information on the bankruptcy process return to our Bankruptcy Guide.
Good legal advice depends on understanding the unique facts of your personal situation. You can only get that in a consultation. That is the best advice we can ever give you. If you need an attorney for your Maryland bankruptcy case, or just want to find out if this is a good option for you, please read about our firm, and then contact us to schedule your free consultation.
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