How Much You Must Owe Before Filing For Chapter 7 Bankruptcy

how much money owe before filing chapter 7 bankruptcy

One of the most confusing decisions to make is whether to file for Chapter 7 bankruptcy or not and the types of bankruptcy — this is a prevailing question in the minds of those who are in debt. 

Let’s discuss on the amount you should have in debt before filing for a bankruptcy discharge, and other options you should consider before filing for bankruptcy. 

Keep in mind that bankruptcies change from state to state. So if you are planning on filing for Chapter 7 bankruptcy in Michigan, it will look slightly different than if you were filing for Chapter 7 bankruptcy in New Jersey. Make sure you take time to look through what your state’s policies are in regard to bankruptcy and read our guide below on filing for Chapter 7 bankruptcy. 

1. How Much Debt Is Enough To File For Bankruptcy? 

One of the most common considerations is how much debt do you want before filing bankruptcy. 

One of the most common questions that people who want to file for bankruptcy ask is how much debt they should have before filing for bankruptcy, as well as what debts can be eliminated by a bankruptcy discharge. Here are some common debts that you should consider when filing for a bankruptcy discharge. 

● IRS tax debt 
● Student loans 
● Unsecured debt (personal loans, medical debt, credit cards, etc.) 
● Student loans 

The question that most debtors should ask is whether they can afford to pay the debt or not. If they have difficulties in paying off their debt, then they should take a debt payoff options calculator like the one below to compare fees and costs, as well as debt freedom dates to know if that is the right option for you. 

For example, if you have a debt of $5,000 and you have the capacity to pay it off in 2 years when you use the debt payoff planning method, it doesn’t mean that the same method is a great choice if you have a $500,000 debt, and can’t pay off the debt with your current income. As such, you should use our debt payoff options calculator as it compares Chapter 13, Chapter 7, Debt payoff Planning, Debt management, and the Debt Settlement option. 

Do You Qualify For Chapter 7 Bankruptcy? 

It is important to note that, if you are planning on filing for Chapter 7 bankruptcy, there are some qualifications that will determine if you qualify. For this, you would need to go through the bankruptcy means test

Here are two government sites and three links to check as resources: 

However, those qualifications change from state to state. So if you are taking the California means test, it will look different from other states’ means test. 

2) Is There A Minimum Amount I Need To Owe? 

There is no certain amount that you can owe, and you will have to file bankruptcy on. You can file bankruptcy even if you owe $5,000 or less in credit card debt, however, that you have the right to file for bankruptcy does not make it a good idea that you should always file for one. 

It is also worthy to note that if you earn above the figure that allows you to file for a Chapter 7 bankruptcy discharge, you can file for Chapter 13 bankruptcy instead. Chapter 13 bankruptcy works differently from Chapter 7 bankruptcy as it is a repayment plan. As such, it is not a good option to file for Chapter 13 bankruptcy for a debt of just $5,000. 

But if you meet the income qualification for a Chapter 7 bankruptcy discharge, you’re filing without an attorney, and you don’t have assets that can be liquidated by the bankruptcy trustee, you can use the Chapter 7 bankruptcy discharge to get rid of the $5,000 debt in not more than six months. 

The disadvantage attached to the scenario above is that you won’t qualify for bankruptcy under the Chapter 7 bankruptcy for eight years after filling the bankruptcy—even when it is direly needed. Since you’re also filing without an attorney, it means that a single mistake can make you lose your assets and not get a discharge. 

3. Understanding What You Owe 

Many people pursue some sort of debt relief option from getting letters from places experiences such as getting letters from PO Box 4115 Concord CA showing that they owe money to a debt collection firm. 

Debt collections firms such as Credence Resource Management often pursue for unpaid debt. as Before making a decision to file for bankruptcy relief, you should first weigh other options you have. You should first compare what you earn with your debt and other necessary financial obligations. Do you have enough money to pay your living expenses after paying your debt? If you don’t, then you should find other ways to get rid of the debt. Some of those ways may be: 

Reduce Your Expenses 

While you are trying to increase your income, you should also learn to cut down on unnecessary expenses. This may be all you need to pay off your debt. 

Debt Settlement 

Apart from working within a budget to pay off debts, and managing your finances, you should also try out debt settlement. In this method, your creditor may want to negotiate that you pay off a fraction of the debt in lump sum. However, the amount written off will add to your tax liability as it will be included in your taxable income for the year. 

Chapter 13 bankruptcy vs debt settlement is often compared when looking at debt relief options because both are payment plans based, and the costs can be similar. 

Earn More Money 

Is it possible to earn more income to settle your debt? Can you get a second job to ensure that you increase your income? Is there a hobby that you can make money from? Think of those questions, as it can be your solution to financial freedom. 

Depending on your debt, raising your income for a year may get rid of your debt without the need to file for bankruptcy. 

Although you can speak with your creditor yourself, you can get a debt settlement company to negotiate on your behalf for free. 

4) How Long Will It Take To Pay Your Debts? 

How long it will take to settle your debt is another important factor that you should consider if you don’t plan to file for a bankruptcy discharge. 

For example, an individual who is on a tight budget that doesn’t allow him/her to increase income or reduce expenses will find it difficult to pay a $10,000 debt than one who can reduce expenses and increase income. For example, if you have a credit card debt of $10,000 and you can only afford to pay $235 monthly, assuming the interest rate is 26%, then you will pay off the debt after ten years, which will sum up to $18,000. 

As such, filing for bankruptcy on a smaller amount of debt is the best option if you have limited resources. 

Just like other things that have to do with finance, an individual has to properly consider all factors before proceeding. Avoid a situation where you base your choices for debt relief on the choice of another person. Also, remember that bankruptcy proceedings can vary. So if you’re filing for a Chapter 7 bankruptcy in New York, you will need state-specific information to determine how long your bankruptcy case may last. 


Filing for bankruptcy can be intimating. Luckily, they can be the best option for you in the long run. Take advantage, but be ready for the work that comes afterwards. You will need to consider building back your credit, maintaining financial stability, and staying out of debt. It’s a lot of work, but it can be worth it!

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