How Much Debt Do You Need to File Chapter 7 Bankruptcy?

There is no minimum amount of debt required to file for Chapter 7 bankruptcy. Instead, your overall financial situation, including income, expenses, and ability to repay debts, determines your eligibility. Chapter 7 is designed to provide relief to individuals overwhelmed by debt, regardless of the total amount owed.

At Morgan & Morgan, we have decades of experience helping Georgia residents evaluate their financial circumstances and make informed decisions about bankruptcy. If you’re unsure whether Chapter 7 is the right option, our experienced attorneys can guide you through the process.

In this article, I’ll explain the factors that determine eligibility for Chapter 7 bankruptcy, the role of the means test, and how to decide if filing is right for you.

 

Is There a Minimum Debt Requirement for Chapter 7 Bankruptcy?

No, there is no minimum debt amount required to file for Chapter 7 bankruptcy under U.S. bankruptcy laws. Instead, the decision to file should be based on whether your financial situation makes it impossible to repay your debts.

Key considerations include:

  • Your disposable income after essential expenses.
  • The cost of filing for bankruptcy, including attorney and court fees.
  • The type of debt you owe, such as unsecured debts (credit cards, medical bills) versus secured debts (mortgages, car loans).

 

How Does the Means Test Determine Chapter 7 Eligibility?

The means test evaluates your income and expenses to determine if you qualify for Chapter 7 bankruptcy. It compares your average monthly income over the past six months to Georgia’s median income for a household of your size.

Steps in the Means Test:

  1. Income Comparison: If your income is below the state median, you qualify for Chapter 7.
  2. Disposable Income Calculation: If your income exceeds the median, the test evaluates your disposable income after allowable expenses. If this amount is insufficient to repay your debts, you may still qualify.

 

What Types of Debt Are Discharged in Chapter 7?

Chapter 7 bankruptcy is most effective for discharging unsecured debts. These include:

  • Credit card balances.
  • Medical bills.
  • Personal loans.

Certain debts, like student loans, child support, and recent tax obligations, are generally not dischargeable under Chapter 7.

 

When Should You File for Chapter 7 Bankruptcy?

Filing for Chapter 7 may be the right choice if:

  • You’re unable to pay your monthly bills.
  • Your debt is growing despite making payments.
  • You face constant creditor harassment.
  • Your income is below the state median, making you eligible under the means test.

 

Common Myths About Debt Requirements for Chapter 7

Myth 1: You need to have a high level of debt to qualify for Chapter 7.
Reality: There is no minimum debt amount to file. Chapter 7 is about financial relief, not the size of your debt.

Myth 2: Filing for bankruptcy costs too much to be worth it.
Reality: While bankruptcy does have filing and attorney fees, the long-term relief from overwhelming debt often outweighs these costs.

 

Factors to Consider Before Filing for Chapter 7

Filing for Chapter 7 is a significant decision. Consider these factors:

  • Filing Costs: Expect total costs between $1,500–$3,500, including attorney fees.
  • Future Credit Impact: Chapter 7 stays on your credit report for up to 10 years.
  • Asset Protection: Georgia’s exemptions allow you to protect certain assets, like your home or car, depending on their value.

 

Can Chapter 7 Bankruptcy Help You? Consult Morgan & Morgan for Guidance

Understanding the requirements for Chapter 7 bankruptcy can be overwhelming, but you don’t have to face this process alone. At Morgan & Morgan, our experienced attorneys are here to evaluate your financial situation, explain your options, and help you achieve the relief you deserve.

Call us today at 706-548-7070 or visit our contact page to schedule a free consultation. Take the first step toward a debt-free future today.

 

FAQs About Chapter 7 Bankruptcy and Debt Requirements

Can I file Chapter 7 bankruptcy with less than $10,000 in debt?
Yes, you can file Chapter 7 with any amount of debt. The decision depends on your financial situation, not the total debt amount. Many attorneys recommend filing only if your debt significantly outweighs the filing costs.

Does filing for Chapter 7 bankruptcy stop creditor harassment?
Yes, filing for Chapter 7 triggers an automatic stay, which halts most collection actions, including calls, lawsuits, and wage garnishments. The stay remains in effect throughout your bankruptcy case.

Can I keep my house if I file for Chapter 7 in Georgia?
In Georgia, the homestead exemption may protect your primary residence, depending on its value and equity. Consult an attorney to evaluate your specific situation.

What happens if my income is too high for Chapter 7?
If your income exceeds the state median and you fail the means test, you may need to consider Chapter 13 bankruptcy instead. Chapter 13 allows you to restructure your debt into a manageable repayment plan.

How long does the Chapter 7 process take?
The Chapter 7 process typically takes 3–6 months from filing to discharge. This timeline can vary based on the complexity of your case.