Is There A Minimum Amount Of Debt Needed To File Bankruptcy?
If you are having trouble paying all of your bills every month you are likely overwhelmed, stressed, and looking for solutions. One possibility that may have crossed your mind is the possibility of filing for bankruptcy. But if bankruptcy is one of your thoughts, you probably have many other thoughts and questions you need answered before you can make a final decision. There are a lot of misperceptions about bankruptcy, and one of them is that you cannot file if your do not have enough debt. However, this is not actually the case, and the way bankruptcy works is a bit more complex than the concept of having too much debt or too little income.
Debt vs. Income Totals In Bankruptcy
In order to file bankruptcy it is true that the amount of debt you have does come into sharp focus. The way it works is like this:
- A calculation about your debt to income ratio is made, referred to as the means test. If your income, in comparison to your secured debt load, is at a certain level you will be required to file a Chapter 13 instead of a Chapter 7.
- The difference between the two types of cases is important, because in a Chapter 7 you are allowed to eliminate all of your unsecured debt but with a Chapter 13 you have to pay back at least a small portion of unsecured obligations.
- Another major difference between Chapter 7 and Chapter 13 cases is that a Chapter 7 is usually over in about 4 to 6 months, while a Chapter 13 can last up to five years.
Debt In Bankruptcy and How The Means Test Calculation Works
Neither type of case is prohibited for having too little debt, it is more a matter of how much secured debt you have compared to your income. Your income is determined by taking an average of your salary over the months leading up to you filing a case. So it can become important to time your filing just right, if you want to provide the Court with the most accurate snapshot of your financial condition. For instance, if you just received a bonus that is out of the ordinary, you might want to wait a while before you file so that payment is not included in your average salary. The computation is complex, but we have experience “doing the math” and making sure the type of case filed is right for you. If you are having financial difficulty, and have more debt than you have income, call us today. We will go over your budget and let you know your options, then help you make a choice that helps you get a fresh financial start.
For more information about how to handle overwhelming debt, contact us at http://www.sacramentobankruptcyattorneys.com/. To learn more about debt and solutions including bankruptcy.