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Law Offices of Stephen Orchard Law Offices of Stephen Orchard

Is There A Minimum Or Maximum Debt Amount That Can Be Discharged In Bankruptcy?

DebtDefense

When people file for bankruptcy, they often worry about how much debt that they have. They worry that maybe the court will be upset that they are discharging too much debt. Conversely, many people feel like a court will look at their debt, see it isn’t a great amount, and tell them they should just pay the debt.

The good news is that this never happens, because legally, in a Chapter 7 bankruptcy, there is no maximum or minimum limit of debt that you need to have in order to file for bankruptcy.

Small Amounts of Debt

This makes sense. Let’s look at minimum debt. What is a small amount to one person, may be crippling debt to another. A court would not look at an amount that a debtor owes, and prevent the debtor from getting a discharge just because the debtor has too little debt.

Of course, if you have very little debt, you may want to talk with your bankruptcy attorney, to see if bankruptcy is right for you—there may be other options for you to manage that debt if it is truly very little. But there is no legal hurdle, and no legal restriction to bankruptcy, just because you have too little debt.

Too Much Debt

The same holds true for too much debt. In Chapter 7 bankruptcy, there is no maximum debt limit that can be discharged. However, with debt that is too high, a court could take a very critical eye towards your filing, and your assets.

It is just human nature. A trustee who sees one person discharging, say, $50,000 in medical bills and maybe a credit card judgment, will act differently than when someone is in court to discharge $1 million in debt.

With higher debts, the trustee may want to take a closer look into the debtor’s assets, or may want to look to make sure that some of that debt wasn’t obtained by the debtor, knowing that she was going to file for bankruptcy.

The trustee may be curious if, for example, the amount of debt you are discharging is very high, but your income is very low. If you are discharging $4 million and show an annual income of $40,000, the trustee may start to wonder if you actually have more income than you are stating.

With higher debt, creditors may be more likely to challenge the bankruptcy, or look closer into the debtor’s assets.

All this means that higher debt bankruptcies may be more difficult. But legally, there is no law that says that a given dollar figure is too high to be legally discharged.

Note that there is a maximum debt limit in a Chapter 13 bankruptcy, which is just under $3 million, which includes secured and unsecured debts, and any debt that is related to unincorporated business debts.

Every bankruptcy case is different. Get the attention that your bankruptcy case deserves. Contact the Boca Raton bankruptcy attorneys at the Law Offices of Stephen Orchard at 561-455-7961 today.

Sources:

uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-13-bankruptcy-basics#:~:text=Any%20individual%2C%20even%20if%20self,11%20U.S.C.

gceps.princeton.edu/wp-content/uploads/2020/10/20jun-JIW_Liu_Markley_Arthur.pdf

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