Is There A Minimum Debt Load To File For Bankruptcy?

Do you remember the tale of the grasshopper and ant? The ant worked industriously all summer to fill his burrow with food for the winter. The grasshopper played all summer and was hungry when winter rolled around. He had nothing stored away. Well, the grasshopper had to borrow money to buy food. A flood took away a large part of the food supply belonging to the ant, enough that he did not have any to sell and his bills started piling up. Both the grasshopper and the ant filed for bankruptcy relief. The judge threw the ant out of court. The judge allowed the grasshopper to file. Why? Because the ant would eventually have the wherewithal to cover his debts; the grasshopper never would. So, the success of having your plea for bankruptcy recognized is determined not by how much you owe, but on your ability of pay off the debt.

No Legal Minimum

No legal minimum bar that you must reach in order to file bankruptcy exists, whether it is a Chapter 7 or a Chapter 13. What is the difference? Basically, a Chapter 7 bankruptcy forces you to sell all assets to satisfy your creditors and you will have no more debt, and only the shirt on your back. Chapter 13 calls off the creditors and garners income from the filer until all the debts are paid. This repayment can take up to five years. Some states have what is called a Means Test. These tests are different for a single, a family of two, etc. If your income is at a certain level you may qualify for Chapter 7 (not much hope of ever paying off the debts). Or, Chapter 13 (probably can pay the debts with supervision).

Be Sure

Just how harsh and deep is your debt? You should consider every which way possible way to work your way out of debt before going the bankruptcy route. Review your budget and your spending habits carefully. Are there expenses that you can cut? Have you considered a second job. A second job could bring in quite a sum each month, probably enough to pay off your creditors. Even if you are working the late shift in the photo department at the Walgreens. Another way to ease the burden is informing your creditors that things are getting bad enough that you are considering bankruptcy. They may be willing to call off the phone calls, or even reduce your debt, until you get the cash to make repayment.

Seek Help

Filing for bankruptcy under either provision can be an arduous task and it is best to get some help. An attorney will help you determine what kind of bankruptcy to file and which debts to include in your appeal for debt relief. The attorney will guide you through the step-by-step process, from court fees to the court hearing. (Usually the attorney fees are rolled into the bankruptcy.) If the attorney is a good counselor, a discussion will occur regarding your real need to file. Bankruptcy is nothing to be addressed cavalierly; it is a life-changing move.

Be Aware

Just because there is no legal limit that governs the success of your plea for debt forgiveness with bankruptcy, does not mean you should go for it. Think about your situation very deeply, look earnestly for alternatives, consult a bankruptcy lawyer. Be careful with attorneys, especially if eager to start filing. The legal fees might be all the attorney wants and may not be really taking your best interests to heart.

By: Mary D Wise

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Mary Wise is a certified loan consultant who helps people get approved for Loans for People with Bad Credit and Guaranteed Christmas Loans. To get help with your financial situation you can visit her at www.badcreditloanservices.com