Debt Limit For Bankruptcy
Debtors considering bankruptcy likely will have different amounts of outstanding debt. The type of debt may also vary with some debtors having more unsecured debt, such as medical bills or credit cards , than others. Some debtors believe that if they owe too much money their bankruptcy case may get denied or dismissed by the court. The truth is in most cases, there isn’t a limit on how much debt you owe but there is an exception to this rule since it depends on which chapter you file.
Chapter 7 bankruptcy is common for helping debtors discharge debt. The chapter is also commonly filed by debtors because there isn’t a specific limit on outstanding debt owed. While it’s true you need to meet qualifications in order to file this chapter, the court will review your household income against the amount of debt owed. This includes reviewing your monthly income and the types of debt you have outstanding (unsecured and secured). The court basically wants to make sure you are seeking bankruptcy protection legally and not abusing the system.
Chapter 13 bankruptcy has limitations on the amount of debt potential debtors can have. Federal bankruptcy laws state a debtor may not owe more than $250,000 in unsecured debt and no more than $750,000 in secured debt. These limitations apply to individuals with regular income. If a consumer owes more than $100,000 in unsecured debt such as personal loans or credit cards, a confirmation hearing may be held by the judge. This helps the court determine if bankruptcy is being lawfully sought by the debtor.