Personal bankruptcy: minimum amount of debt required to file for bankruptcy

If you are in debt and over your head, then perhaps you have considered filing for bankruptcy as an option. Many people come to my office with the same question: “How much debt is enough to file?” The answer is astonishingly simple.

If you can’t pay your bills and you won’t be able to do it without a radical change in your financial situation, then you must do something. Fast. Bankruptcy may be an option, but it is certainly not the only option.

There is no minimum amount you must owe to file for Chapter 7 or Chapter 13, but there is a rule of reason that applies. If you don’t owe much more than legal fees to file a case, then there is no point in filing it at all.

For example, let’s say you have $ 3,500 in credit card debt and nothing else. You are unemployed and unable to make payments. Sounds like a dunk for a Chapter 7 bankruptcy, right?

Maybe not. Consider this: a lawyer can charge you a decent portion of that amount. Let’s say you find an experienced and reliable attorney who is going to do the job for $ 2,000. Why hire you when you could easily use that money to eliminate more than 50% of your total debt load?

In this illustration, it is a bad idea to file bankruptcy. You can take the $ 2,000 and put it toward your debt burden, bringing it down to a total of $ 1,500, something that could be more easily managed.

Of course, this assumes that you are hiring an attorney for your case. Although it may be tempting to think that you should go the do-it-yourself route when dealing with a small amount of debt, keep in mind the fact that bankruptcy is a highly specialized field of law. Most attorneys work for years to learn the basics, and the law is a complex and ever-changing beast. Even with a small amount of debt, your case may be more complex than you think.

And if you screw it up … well, that means a lot more in the way of trouble.