We are often asked by clients whether they have enough debt to "qualify" for bankruptcy. This is a tough question to answer because no two people have exactly the same situations. However, here are some general observations that should help you figure out whether bankruptcy may be right for you:
1. If you have less than $7,500 in debt, it is unlikely we would ever recommend a bankruptcy for you. The exception to this rule is if you are on a permanent, fixed income such a social security.
2. Most people that file chapter 7 bankruptcy have between $10,000 and $30,000 in debts that can be discharged, including credit cards, personal loans, auto repossession debts, utilities, and medical bills. Your total debt may be much higher if other types of debts such as student loans, income taxes, mortgages, and current auto loan debts are included.
3. If your unsecured debt is more than 50% of your annual income, you are probably in financial danger. So, for example, if you make $20,000 a year before taxes, then you should seek legal advice if your total dischargeable unsecured debt exceeds $10,000.
4. If you are behind on mortgage payments or real estate taxes, bankruptcy may be the best way to obtain the time you need to get caught up on these debts.
5. If you are being threatened with legal action or garnishment, your debt situation is probably serious enough to consider bankruptcy. Remember, that bankruptcy can stop garnishments and other collection at almost any stage, so it is almost never too late to seek assistance.
6. If you are feeling the physical or psychological effects of debt (such as depression, anxiety, high blood pressure), it is a good idea to speak with a bankruptcy attorney just to get some general advice. Your situation may actually not be as bad as you think, and a little reassurance and guidance may be all you need.