Tag Archives: minimum debt

Should Someone with $20,000 in Credit Card Debt File Bankruptcy?

At the risk of sounding like a lawyer, it depends. Sometimes I am asked, “I have $10,000 in debt (or $30,000 or $80,000 or whatever). Can I file? And should I file?” As to the first question, there is no minimum amount of debt required to file bankruptcy. If you are otherwise qualified, you can file bankruptcy.

The second question as to whether you should file is more nuanced. Just because you can file does not automatically mean it’s a good idea. I have clients with little debt that choose to file bankruptcy for strategic reasons or because their income level necessitates it. And I meet with people that have over $100,000 in credit card debt, taxes or some other albatross around the neck, but do not file for various reasons; maybe they actually have the income to pay it off or have too much in unprotected assets.

And I meet with clients who could go either way. They can file and get a good result, or maybe they can pay back the debt. It then it depends on whether they can pay back the debt in a few years, or whether it will take 33 years of minimum payments and depends on the short term and long term goals. The decision on whether to file is based on a comprehensive analysis. Sometimes bankruptcy is a silver bullet. Sometimes it’s not.

For those in financial distress and wondering what to do, the worst case scenario is that you gather information. Talk to a financial advisor, a bankruptcy attorney and any other professionals that may be relevant to your situation. At the very least, you want to make an informed decision.

Then you can decide whether filing with $20,000 or $200,000 in debt makes sense.

What is the Minimum Debt to File Chapter 7 Bankruptcy?

By: San Francisco bankruptcy attorney, Jeena Cho

Potential clients frequently ask me “What is the Minimum Debt to File Chapter 7 Bankruptcy?” My answer is, “it depends.” A $10,000 credit card debt may be manageable to one client, but overwhelming for another. In helping clients decide if bankruptcy is a good option for him or her, I ask them to consider the following.

  1. What’s your exit strategy? In another words, how are you going to pay off your debt? Too often, clients get stuck simply making minimum payments and spinning their wheels, not finding an exit strategy. Meanwhile, they throw away money on payments on debt that would otherwise be discharged in bankruptcy.
  2. Are you at a point where you can live without credit? If the client is still at a stage where he/she needs continuing credit, or is not in a position where he can stop accumulating more debt, time is not ripe for filing for bankruptcy. For instance, if a client has ongoing necessary medical treatment where he will continue to accumulate more debt, it’s not an ideal time to file.

There is no magical answer to the question “What is the Minimum Debt to File Chapter 7 Bankruptcy?” There is no law requiring you to have maximum or minimum amount of debt for Chapter 7 (there is maximum debt limit for Chapter 13). Some other factors you may want to consider in deciding whether to file for bankruptcy: Should I file?

 

Do you have questions? Come in for a consultation. Contact us.