Do I Have Enough Debt to File for Bankruptcy?

There is no minimum debt amount needed to file for bankruptcy. Learn how to determine whether bankruptcy is a good option for you.

By , Attorney · University of the Pacific McGeorge School of Law

Debtors don't need a certain amount of debt to be eligible for bankruptcy relief. In most cases, whether bankruptcy is the right choice for you will depend on your ability to repay your debts outside of bankruptcy, if your creditors are willing to work with you, and the type of debt you want to "discharge" or eliminate in bankruptcy.

No Minimum Debt Amount Needed to File for Bankruptcy

If you don't have much debt but want to file for bankruptcy, you're free to do so. However, a bankruptcy court might find your filing concerning. Here's why:

  • Limited debt collection period. A creditor has limited time to collect a debt. If the creditor doesn't file a court action within the statute of limitations period—usually two to six years—the creditor loses its rights (as long as the creditor doesn't have a lien against the property). You might be better off to wait until the statutory period expires.
  • Judgment-proof debtor status. Filers with minimal debt are often "judgment proof." They don't have income or property that a creditor can attach or collect. If you don't think your situation will improve, there won't be much reason to file.
  • Negative credit report impact. Filing for bankruptcy will impact a debtor's credit report for seven to ten years, so it's essential to weigh the benefit of discharging minimal debt against the detriment of long-term credit damage. However, in most instances, credit improves faster after filing for bankruptcy than doing nothing. Many filers can finance a car or home a few years later.
  • Waiting period for additional discharge. You're entitled to receive a bankruptcy discharge only so often, so saving your bankruptcy discharge might be a good idea. If you find yourself facing thousands of dollars in medical debt down the road, you'll likely wish you would have waited to file.

Can You Repay Your Debt Outside of Bankruptcy?

Before making a hasty decision to file for bankruptcy, consider whether you can repay your debts outside of bankruptcy. If you have sufficient income, you might be able to pay off your debts without bankruptcy.

A credit counseling agency can help determine whether you can pay off your debts through a debt management program. But don't go to just any credit counseling agency—a shady organization might charge you for questionable services. Instead, try an agency approved by the U.S. Trustee. You can find a list by going to the U.S. Trustee website and clicking on "Credit Counseling and Debtor Education."

Can You Negotiate Your Debt With Your Creditors?

If you can work out a solution directly with your creditors, you might not need to file for bankruptcy. In some cases, creditors might be willing to work with you to cure your default. By negotiating with your creditors, you might be able to:

  • settle your debts for less than you owe
  • reduce your principal balance or interest rate, or
  • enter into a payment plan to get caught up.

You'll want to try to settle debt with all creditors before choosing this option. It won't make sense to pay some creditors only to file for bankruptcy later. When deciding whether settling is the best option, consider the federal income tax assessed on the forgiven debt, too.

Will Filing for Bankruptcy Be a Good Option?

If paying outside of bankruptcy isn't feasible, you'll want to begin learning about the differences between Chapters 7 and 13 and deciding which chapter is right for you. While learning the basics, you'll want to keep a few issues in mind.

Will Bankruptcy Eliminate Enough of Your Debt?

Bankruptcy might not eliminate all of your debt. Certain debts, known as nondischargeable debts, are too essential to be discharged in bankruptcy, and it might not be in your best interest to file for Chapter 7 if most of your debts fall into these categories:

  • domestic support obligations such as alimony and child support
  • priority tax debts
  • debts incurred through fraud or false pretenses
  • obligations arising out of personal injury caused by drunk driving, and
  • student loans unless you can prove that the undue hardship exception applies in your case.

Paying off nondischargeable debts in Chapter 13 bankruptcy. In many cases, filing for Chapter 13 bankruptcy can provide an affordable and convenient way to reorganize and repay nondischargeable debts through a three- to five-year repayment plan. Learn more about how the Chapter 13 repayment plan works and debts discharged in Chapter 13 but not Chapter 7.

Maximum debt limits for Chapter 13 bankruptcy. Typically, you can have a particular amount of secured and unsecured debt. For instance, the figures for cases filed between April 1, 2022, and March 31, 2025, are $1,395,875 in secured debt and $465,275 in unsecured debt. However, the Bankruptcy Threshold Adjustment and Technical Corrections Act ("BTATC") temporarily increased the debt total to $2.75 million until July 2024 unless the increased limits are extended. Check for current debt limits on the U.S. Courts Chapter 13 Bankruptcy Basics webpage.

Other Reasons to Consider Filing for Bankruptcy

Whether filing for bankruptcy relief is in your best interest will depend on the circumstances above, but some situations can tip the balance in favor of bankruptcy. Be sure to act quickly if a creditor is:

If you aren't sure what direction is best for you, consider meeting with a bankruptcy lawyer. Not only will a bankruptcy attorney advise you of your options, but most offer a free consultation.

Need More Info?

We want to help you find the answers you need. Go to AllLaw's Topic page for more easy-to-understand bankruptcy articles, or consider buying a self-help book like The New Bankruptcy by Attorney Cara O'Neill.

We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by consulting with a local bankruptcy lawyer.

Updated April 17, 2024

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