A common question raised by people who talk to a New York bankruptcy lawyer is “Do I have enough debt to file bankruptcy?” It’s a sensible question to ask because we tend to think that the law imposes minimum thresholds and other requirements in many circumstances, like speed limits. For a straight liquidation, chapter 7 bankruptcy, however, there is no minimum debt level that someone must have to file. The more pertinent question is whether debtors have enough debts to make filing worth their while, but that’s a factual matter that must be discussed in an attorney consultation. There is no maximum debt level for chapter 7.
Obviously, people with small debts should probably not file bankruptcy. Negotiating with lenders would probably be more productive. The legal fees and other costs might reduce the value of filing as well.
Debtors do need to be aware that if their incomes are high, they might not be able to file in chapter 7 due to the “means test,” which presumes that debtors whose incomes are above the median family income for their state are filing abusively. In New York, the median income for one person is $57,137, and it increases with each additional family member. High-income debtors can overcome the presumption that their chapter 7 filing is abusive by proving their situation merits special circumstances. Otherwise, they must file in chapter 13 or chapter 11.
Chapter 13 also doesn’t have a minimum debt threshold, but it does have a maximum debt limit for unsecured and secured debts. These limits are very high, and most people who file bankruptcy never have to worry about them. Currently, for unsecured debts, the limit is $394,725, and for secured debts, the limit is $1,184,200. People whose debts exceed these levels will have to file in either chapter 7 or chapter 11, which has no debt limits either.
The Bankruptcy Code gives debtors a few options for fixing their financial straits. Choosing the right one, however, is best done with the help of an experienced New York bankruptcy lawyer.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced fair debt collection practices act Bruce Weiner for a free initial consultation.