How Much Debt Do You Need to Qualify for Bankruptcy?
If you’re one of the thousands of Americans struggling with unsustainable amounts of debt because you lost your job during the recent economic downturn or you or a family member had a medical emergency, you may be considering bankruptcy to relieve you of your debt and give you a new financial start in life. In all likelihood, however, you have questions about whether or not you qualify based on the amount of your debt.
Most types of bankruptcy do, in fact, have debt limitations. Here they are for the most popular bankruptcy types:
- Chapter 12: $4,153,150 total debt if you’re a family farmer or $1,924,550 if you run a commercial fishing operation.
- Chapter 13: $1,184,200 in secured debt and $394,725 in unsecured debt
Keep in mind, however, that both Chapter 12 and Chapter 13 have other filing qualifications in addition to the amount of your debt.
Chapter 7
Chapter 7, the quickest and most popular kind of personal bankruptcy, does not have debt limitations. Instead, its qualifications have to do with the amount of your income. Each state has its own income qualifications, called the means test, that compares your net income with the median income of a family of your size. If your income falls at or below your state’s median income, you qualify for Chapter 7.
As you might expect, the median income varies from state to state. For instance, consider the following:
- In Colorado, the median annual income for a family of four is $115,473.
- In Illinois, the median annual income for a family of four is $108,549.
- In Iowa, the median annual income for a family of four is $96,373.
- In Maine, the median annual income for a family of four is $92,782.
- In Texas, the median annual income for a family of four is $89,196.
- In Arizona, the median annual income for a family of four is $85,714.
- In Florida, the median annual income for a family of four is $85,203.
- In New York, the median annual income for a family of four is $83,614.
- In California, the median annual income for a family of four is $75,111.
- In New Mexico, the median annual income for a family of four is $67,161.
- In Mississippi, the median annual income for a family of four is $51,140.
Obtaining Legal Advice
Your wisest course of action when considering bankruptcy is to consult with an experienced local bankruptcy lawyer such as Marty Martin Bankruptcy Law. He or she should be able to answer all your bankruptcy questions and advise you of all of your options going forward.
