In a Chapter 7 bankruptcy, there are no guidelines or limits to the debt amounts included in a Chapter 7 bankruptcy petition. If you are considering bankruptcy as a potential solution to your debt issues, you may at some point have asked yourself these questions:
1. Do I have enough debt for bankruptcy?
2. Do I have too much debt for bankruptcy?
We have answered both questions for many clients. There are no rules in Chapter 7 bankruptcy to determine whether you have too little debt or too much debt. Chapter 7 allows any amount of debt to be discharged in the bankruptcy as long as you qualify for a Chapter 7 bankruptcy. Qualifying for Chapter 7 can be accomplished in a few ways. There are median income levels which are set as guidelines to qualify for Chapter 7 depending on the amount of people you have in your household. Also, if your expenses and bills (debt payments) exceed your income, you qualify for Chapter 7 bankruptcy by method of a “means” test. The means test will illustrate that your income deficiency compared to the amount of expenses you are responsible for.
Usually, when a client calls us to ask if they have too little debt for a Chapter 7 bankruptcy, our advice/recommendation depends on multiple factors. The first to consider is future income. No matter how big or how small your debt is, are you able to foresee a way to pay it off in the future? If you have $2000 worth of debt, bankruptcy could possibly be avoided if you have a good income stream, but if you are unemployed and you do not see how you can pay this $2000 in the future without using up some of your savings, then bankruptcy may be the best solution. If you have $10,000 in your bank account and you are not interested in using any of the $10,000 to repay your debts (because you know you will need the $10,000 for living expenses), a bankruptcy can eliminate the debt and stop them from forcing you to use your last resources to pay debt.
When clients call us to ask if they have too much debt for bankruptcy, they are usually very surprised to learn that there is no debt limit for secured or unsecured debt in Chapter 7 bankruptcy. Chapter 7 bankruptcy can discharge millions in debt if you can qualify for Chapter 7. Real estate is usually the largest debt that most people owe. If a client had a one million dollar mortgage amount and they wanted to surrender the home, any unsatisfied commitments of the mortgage can be discharged in bankruptcy and the actual surrender of the home can be organized through the bankruptcy proceedings.
Whether you have one million or a few thousand in debt, Bankruptcy Law Professionals can help you use examine your rights in Chapter 7 bankruptcy to eliminate your debts and save what remains of your cash, savings, and any other assets that you need to protect. Bankruptcy along with any legal processes can sometimes be ambiguous or relative to translation of the rules. The best experience you can utilize is from people who have utilized the process thousands of times as Bankruptcy Law Pros has done with Riverside bankruptcy processes and Orange County bankruptcy processes.
If you have additional questions or if you would like to schedule an in-person or phone consultation, you can reach Bankruptcy Law Professionals at (855) 257-7671.