A common question people in California who are considering filing for bankruptcy have is, “how much debt to I need?” This question is a reasonable one, as most people anticipate that there are specific rules and regulations governing bankruptcy. However, there is no minimum debt requirement to file for bankruptcy. The real question our attorneys at The Bankruptcy Group get is, “do I have enough debt to make filing for Chapter 7 worthwhile?” Below, our Roseville, CA bankruptcy attorneys looks at that question in more detail.
How Much Debt is Too Little to File for Chapter 7 in California?
As stated above, there is no minimum amount that the Bankruptcy Code requires to file for bankruptcy. Answering what amount is necessary to make filing for Chapter 7 reasonable and beneficial depends on each debtor’s circumstances. If your only debt is a $2,400 credit card balance, then bankruptcy is probably not in your best interests. The filing fee and attorney’s cost alone would make filing for bankruptcy impractical.
Additionally, the Bankruptcy Code limits the number of Chapter 7 discharges available to a debtor. You can only have your debt discharged through bankruptcy every eight years. Therefore, you do not want to use this powerful tool if the amount of debt does not warrant it.
How Do I Know if I Have Enough Debt for Chapter 7 Bankruptcy in California?
Every person’s financial situation is different, and the reasons someone will file for bankruptcy are as varied as the number of people filing each year. One of the best ways to determine if the amount of debt you have requires seeking a discharge through the court is to sit down with our experienced California bankruptcy attorney and thoroughly review your debts, your income, and your assets.
However, there are some clear indications that your debt has gotten out of hand. If you are living paycheck to paycheck while making the minimum payments on your credit cards and any personal loans, then it likely that you are stretched too financially thin. When you are transferring credit card balances just to lower an interest rate, you are not making any headway in paying down your debt. Letting utility bills slide for a month or two while you try to pay other obligations is also an indication that a bankruptcy could be helpful. Furthermore, if you find yourself considering or selling your possessions to pay your monthly bills, you should be calling our sympathetic California bankruptcy attorney immediately.
Determining if Chapter 7 Bankruptcy is Best for Me in California
Before you can determine if filing for Chapter 7 is the best solution in your situation, you need to see if you qualify to file a Chapter 7 case. When most people think of bankruptcy, they imagine a Chapter 7 filing. It is the most common type of bankruptcy filed in California. Also known as a liquidation bankruptcy, the majority of a person’s debts are often eliminated within four to six months.
To determine if you qualify, our California bankruptcy lawyer will see if you pass the means test. The means test is a detailed calculation that takes your last six months of income and deducts certain qualified expenses and federally mandated deductions to determine your current monthly income (CMI). If your CMI is less than the state median income level, you qualify to file a Chapter 7 case. As of May 2020, the median monthly income for a household of one in California is $5,030, while the median monthly income for a family of four is $8,442.92. Our attorney will review the specific median for your situation.
Types of Debt that are Best for Chapter 7 Bankruptcies in California
Almost as important as the amount of debt you have is the type of debt you have when you are considering filing for Chapter 7. The purpose of bankruptcy is to eliminate debt and give the filer a fresh financial start. If you are unable to discharge your debt, then the Chapter 7 bankruptcy will not be serving its purpose. While the vast majority of debt can be eliminated through bankruptcy, including credit card bills, medical expenses, personal loans, and even secured debt, if you surrender the collateral, certain obligations have been deemed nondischargeable by Congress.
If you want to discharge student loans, back alimony or child support payments, or certain tax obligations, Chapter 7 will not eliminate the debt and or give you the fresh start that you desire. Additionally, debts that have been accrued through fraud, criminal restitution, and personal injury judgments arising from drunk driving are also not dischargeable through bankruptcy. It is crucial to review not only the amount of debt you have with our California bankruptcy attorney; you must also list the various types of debts you have.
Call Our California Chapter 7 Bankruptcy Attorney to Review Your Situation and the Amount of Debt You Have
Financial hardship can hit at any time. If you are struggling, living from paycheck to paycheck, letting some bills pile up because you are unable to afford them, and have little to no savings, a Chapter 7 bankruptcy could help you. Potential debtors should worry less about the amount of debt they have and focus on how that debt is negatively impacting their lives. Our California bankruptcy attorney will answer any questions you have concerning your amount of debt, the type of debt, and the potential benefits of filing for Chapter 7 bankruptcy. Call The Bankruptcy Group at 1-800-920-5351 to schedule a free appointment to review your situation.