If you are in financial distress and contemplating filing for bankruptcy, you may be wondering if there is a debt threshold required to initiate the process. Must you accumulate a specific amount of debt to qualify?
The short answer is no; there is no minimum or maximum debt requirement for filing Chapter 7 bankruptcy. Your overall financial situation and other eligibility criteria are what matters. Here is what you should know.
Understand the eligibility criteria
One of the primary requirements for Chapter 7 bankruptcy is the means test. You must pass this test to qualify, although there are some exceptions. The means test assesses whether you have enough disposable income to repay your debts, which informs whether you are eligible for Chapter 7 bankruptcy.
In a nutshell, the means test works by comparing your current monthly income to the median income for a similar household in the state. If your income is below the median, you automatically qualify. Should your income exceed the median but your disposable income is low enough, you may also be eligible for Chapter 7 bankruptcy.
You may also be required to complete a credit counseling course from an approved agency to ensure you understand the consequences of bankruptcy and explore any possible alternatives.
Make informed decisions
Filing for bankruptcy is a serious decision with long-term implications. As such, you should not rush into the process just because of a slight financial setback. Take your time to understand the impact and look into other viable alternatives like debt renegotiation or consolidations to help manage your debts without the lasting consequences of bankruptcy.
Seeking legal guidance can help you understand the intricacies of bankruptcy and make decisions in your best interests as you forge toward financial stability.
