The short answer? No. There is neither a specific amount of debt required by law nor a definitive rule of thumb. Instead, there are several strong indicators that should be weighed and considered before deciding if bankruptcy is the best option.
If you can afford to pay your ongoing monthly needs (rent, clothing, utilities, car payment, groceries, etc.) while reducing long-term debts, you may well dig yourself out of debt without the necessity of a bankruptcy. However, if you can’t afford to repay, in full, your medical bills and credit cards in one to two years, that’s a red flag.
Statistically, it will take you 15 to 20 years to pay off your credit cards by making only the minimum payment. If the minimum amount is all you can afford, perhaps a bankruptcy would be right for you.
Did you know that a creditor with a judgment in place against you can garnish 15-25% of your take-home pay? If you’re like many Americans, each penny of your paycheck has its place—from your mortgage to the gas you put in your car. So a garnishment on part of your paycheck is a hit few people can absorb without any consequences. After a garnishment starts, if you can’t pay for your basic needs, you need to file bankruptcy.
Debt collection lawsuits pack a double whammy—the financial cost and the emotional toll it takes on the debtor. Can you handle the stress and cost from one or more debt collection lawsuits? Once a judgment is obtained against you, the creditor can make you appear in court for a debtor’s examination and send the sheriff to your home to take property.
Perhaps you’ve contemplated a garnishment payment plan in order to pay off the judgment. However, these plans cost much more in the long run with added court costs, interest, and attorney’s fees.
The stress and embarrassment of collection suits can be a huge factor in your decision. For some, financial stress can be so extreme as to become a serious health hazard.
Your decision about whether to file bankruptcy should be based on your overall situation and not on a specific debt dollar amount. If you decide bankruptcy is the best choice, contact Steffens Law to schedule a consultation and learn more about your legal options.