Although you do not need a fixed amount of debt on you to file for bankruptcy, these factors will help you decide if you need to file for bankruptcy or not. Some chapter of bankruptcy have limits to the debts but no such thing as minimum debt.
The best thing to ask in your situation is that will bankruptcy give you the necessary relief if you file for bankruptcy? In this post, we will talk about whether the amount of your debt and your circumstances are enough to make you file for bankruptcy with the help of a Bankruptcy Attorney San Diego.
Indications of When to File for Bankruptcy
While there is no minimum amount of debt to file for bankruptcy, it is however, a big deal to consider the amount of debt to file for bankruptcy.
These are some more indicators of when you should file for bankruptcy:
- Repaying ability outside the bankruptcy
If your creditors will work with you
If you can have the debt discharged in bankruptcy
Other things depending on the type of case you have
Is Bankruptcy the Solution for Your Situation?
When you determine the best solution for your situation, you need to make sure that you qualify for a Chapter 7 bankruptcy. Chapter 7 bankruptcy is the most common type of bankruptcy to file which is a total liquidation. This bankruptcy helps you get out of debt in a short amount of time and get a fresh start in your life.
If your income is high enough to pay your debts back, you will not be able to qualify for a Chapter 7 bankruptcy or you will have to give back a big portion of your unsecured debts in a Chapter 13 bankruptcy. A bankruptcy attorney San Diego CA will be able to help you with this.
Can You Repay Your Debts Outside a Bankruptcy?
If you have sufficient income to pay off your debts, you can pay them off instead of filing for bankruptcy. You can sign up for a debt management program to see whether you can pay off your debts or not with the help of a credit counseling agency. However, you need to look out for these as some may charge you for fake services. If the agency is approved by the U.S. Trustee, you can go for them on the U.S. Trustee website.
Will Your Creditors Work With You?
If your creditors are willing to work with you, you do not have to file for bankruptcy. In some cases, your creditors will help you:
- Settle your debts for less than what you owe
Reduce the amount that you owe or decrease your interest rate
Make a payment plan to pay off your debts
You should try to settle your debt with all your creditors before trying this. You also need to look out for the federal income tax on the forgiven debt that you have.
Types of Debt You Have
A bankruptcy filing doesn’t wipe out all types of debt that you may have. Debts that cannot be discharged in a bankruptcy discharge are called non-dischargeable debts. Common non-dischargeable debts such as alimony, child support, tax obligations, and student loans cannot be discharged.
Filing for a Chapter 7 bankruptcy is useless if most of your debts are non-dischargeable debts. But you can pay off your non-dischargeable debts through Chapter 13 bankruptcy through a 3 to 5-year repayment plan.
When Should You File?
Filing for bankruptcy can be a good thing if you don’t have enough income to pay off your debts, creditor harassment, wage garnishment, foreclosure or repossession of property. All these factors can help you make your decision of filing for a bankruptcy.