Do I Have Enough Debt to File for Bankruptcy?

Although you don't need to have a specific amount of debt to be eligible for bankruptcy, other issues will determine whether bankruptcy is a good option for you.

Updated March 8, 2019

Bankruptcy laws don’t require debtors to have a certain minimum debt amount to be eligible for bankruptcy relief. In most cases, whether bankruptcy is the right choice for you will depend on your individual circumstances. (Learn more about whether or not bankruptcy is right for you.)

No Minimum Debt Amount for Bankruptcy

There is no minimum debt requirement in bankruptcy. How much debt you have is certainly an important consideration when determining whether bankruptcy is in your best interest. But more importantly, whether it makes sense for you to file for bankruptcy depends on:

  • whether you are able to repay your debts outside of bankruptcy
  • whether your creditors are willing to work with you
  • whether you can discharge (wipe out) the types of debt you have in bankruptcy, and
  • the facts of your individual case.

Maximum debt limits for Chapter 13 bankruptcy. While there is no minimum debt amount required to file for bankruptcy, you can’t have more than $1,257,850 in secured debt or $419,275 in unsecured debt if you want to file for Chapter 13 bankruptcy (these amounts, which are adjusted periodically to account for inflation, are valid as of April 2019).

Can You Repay Your Debts Outside of Bankruptcy?

Filing for bankruptcy is an important financial decision that can affect your credit for years to come. Before you make a hasty decision to file for bankruptcy, consider whether or not you can afford to repay your debts outside of bankruptcy. If you have sufficient income, you may be able to pay off your debts without resorting to bankruptcy. (Learn more about alternatives to bankruptcy.)

A good credit counseling agency may be able to help you evaluate your situation and determine whether you might be able to pay off your debts through a debt management program. But don't go to just any credit counseling agency -- there are many shady organizations that take your money and provide questionable services. (For information on debt relief services to avoid, see the articles in Nolo's topic on Debt Settlement and Negotiating With Creditors.) One good bet it to use one of the agencies approved by the U.S. Trustee. You can find a list by going to its website at http://www.justice.gov/ust and clicking on “Credit Counseling and Debtor Education.”

Limits on how often you can receive a bankruptcy discharge. There are also certain limits to how often you can receive a bankruptcy discharge. This means that if you don’t have a lot of debt, it may be a good idea to save your bankruptcy filing for when you might really need it. (Learn more about how often you can receive a bankruptcy discharge.)

Can You Negotiate With Your Creditors?

If you can work out a solution directly with your creditors, you may 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 may 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.

Will Bankruptcy Eliminate Your Debts?

Bankruptcy may not eliminate all types of debt you have. Congress has decided that certain debts are too important to be discharged in bankruptcy (these are commonly referred to as nondischargeable debts). If most of your debts are not dischargeable in bankruptcy, it may not be in your best interest to file.

The following are some of the most common debts you can’t discharge in bankruptcy:

  • 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 for you to reorganize and repay your nondischargeable debts. Even if you can’t discharge your nondischargeable debts in bankruptcy, you can pay most of them off through your repayment plan in Chapter 13 bankruptcy (you won't pay long-term debts in full, such as a mortgage or student loan). (Learn more about how the Chapter 13 repayment plan works.)

When You Might Consider Bankruptcy

Whether or not filing for bankruptcy relief is in your best interest will depend on your individual circumstances. But in many cases, no matter how much debt you have, it might make sense to consider bankruptcy if you can’t afford to pay back your debts and your creditors are:

  • suing you
  • garnishing your wages, or
  • trying to repossess or foreclose on your property.

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