There is no minimum debt for filing bankruptcy, but the amount you are going to file for most certainly affects the outcome. As bankruptcy lawyers, we know that one of the first things to consider is whether filing is really in your financial best interests.
Some of the facts you have to consider are:
- Are you able to repay your debts with a restructuring and staying out of bankruptcy?
- Will your creditors be willing to work with you?
- Can you discharge (wipe out) your debts completely?
- All the exact financial details of your case.
There is no minimum amount of debt for Chapter 7 bankruptcy, but there is a maximum amount. In most states, you can’t have more than $1,257,850 in secured debt (usually home, automobile, boats, or motorhomes) or $419,275 in unsecured debt (usually credit cards, medical bills or personal loans).
Your Massachusetts bankruptcy attorney will go over all the details of your case and guide you in deciding the type of bankruptcy you should file. Although there is no financial minimum in Massachusetts, the type of debt you have (secured or unsecured) may be a deciding factor as to whether you should file.
Many times, if your debt is not too large, changes in your family’s life may make it possible to pay your debts. Your creditors may be able to work with you through this challenging financial time. If you decide to file, your bankruptcy attorney will make sure you know all the possible ramifications of your filing and make you aware of exactly how it will affect you and your family.
What Should I Consider Before I File Bankruptcy?
If you feel like you’re drowning in debt and having trouble keeping up with your payments while still handling your living expenses, you may have at least begun to consider bankruptcy. Filing for bankruptcy is meant to give people in serious financial distress some relief and a sincere chance to start over. By the time most people get to that point, they’ve probably tried many other methods to manage their debt.
To know if it’s time to file, some of the “red flags” to look for are:
- You’re in danger of losing your home.
- You’re using loans to pay your bills.
- You’re liquidating your retirement or other assets.
- Debt collectors call frequently, which can be very stressful and interfere with your life and family’s well-being.
If you are experiencing any of the above factors, you should meet with a bankruptcy attorney to discuss your options and see how you can be helped.
What are the Types of Bankruptcies I Should Discuss with My Bankruptcy Attorney?
There are two types of bankruptcy filings. In a chapter 7 bankruptcy, your nonexempt assets can be sold, and the proceeds can be used to pay debts. An individual must pass a means test before they can file a Chapter 7 bankruptcy to ensure that the court would not be abusing the bankruptcy law by granting one.
This sounds extremely scary, but there are limits to what the court can liquidate and leave you without. The courts know that you and your family have to maintain a roof over your head, get to work, and essentially be able to live your lives. Your bankruptcy attorney should be dedicated to getting your life and finances back on track and will explain all these details of chapter 7 bankruptcy to you.
The facts of your particular case presented correctly to the court will most certainly help in getting the outcome you need. You will also thoroughly discuss all the details of the “means test” that you have to pass for chapter 7 bankruptcy with your attorney. During that process, you will be assigned a bankruptcy trustee. The trustee is allowed to sell your property in order to settle your debts, but certain property is protected.
For example, your house and car are protected up to certain limits. Retirement accounts like 401(k)s and 403(b)s are fully protected, while IRAs are protected up to a certain amount (around one million dollars). Other accounts, however, such as checking, savings, and regular investment accounts may not have the same protections. Keep in mind that the type of assets you own and their value matter a great deal if you’re going through chapter 7 bankruptcy.
A chapter 13 bankruptcy may also be known as the “wage-earner plan.” To qualify, an individual must have a steady income. This allows them to pay back all or part of their debts by developing a repayment plan, and the plans last between three and five years. Once that time period is over, you would have to continue to repay your creditors as usual. There are definite reasons to choose the type of bankruptcy you’re going to file, and your bankruptcy attorney will make sure to help you choose the right one.
Bankruptcy usually does not protect you from any future debts incurred. It also will have an effect on your credit score and it remains on your credit report for ten years with a Chapter 7 case and seven years with Chapter 13. In a Chapter 7 bankruptcy, you do have a risk of losing assets such as your house or your car depending on how much equity they have in them and if you’re able to exempt your equity and remain current on your payments.
You and your family’s financial future is on the line, no matter how you decide to proceed. Consulting with a Massachusetts bankruptcy attorney will be invaluable in determining the financial path you take. Getting the financial relief you need to get back to a peaceful and hopeful life is a real possibility.