How Much Debt Do You Need to File Bankruptcy? (No Minimum)

The answer surprises most people: zero. There is no minimum debt requirement to file bankruptcy in the United States. Not $5,000. Not $10,000. Not any specific number.

The decision to file bankruptcy hinges on a different question: Is your debt preventing you from building a stable financial life? If you're paying minimums on credit cards with no path to payoff, or if medical bills consume every paycheck, bankruptcy may make sense whether you owe $7,000 or $70,000.

About 400,000 Americans filed Chapter 7 bankruptcy in 2023. Some owed six figures. Others owed less than what they'd spend on a used car. The number matters far less than the damage debt is doing to your life.

When Bankruptcy Makes Sense (Regardless of Amount)

You don't measure bankruptcy eligibility by debt size. You measure it by whether debt is breaking your ability to function financially.

Consider filing bankruptcy if:

• You're making minimum payments with no progress. If you're paying $200/month on a $6,000 credit card and the balance hasn't moved in two years, you're funding interest, not escape.
• Creditors are suing or threatening garnishment. Once a lawsuit is filed, your timeline accelerates. Bankruptcy stops lawsuits immediately through automatic stay.
• You're using retirement funds to pay unsecured debt. Retirement accounts are protected in bankruptcy. Draining them to pay credit cards is the reverse of smart.
• Debt collectors call daily. If you're dodging calls or your anxiety spikes when the phone rings, that's a quality-of-life cost that compounds.
• You can't afford both debt payments and basic needs. Choosing between rent and credit card minimums means debt has become unsustainable.

The question is not "Do I owe enough?" The question is "Is this debt ruining my life?"

What Debt Can Bankruptcy Eliminate?

Chapter 7 bankruptcy wipes out most unsecured debt. That includes:

• Credit card balances
• Medical bills
• Personal loans
• Payday loans
• Collection accounts
• Old utility bills
• Some tax debt (older than three years, under specific conditions)

What doesn't get discharged:

• Student loans (with rare hardship exceptions)
• Recent tax debt
• Child support and alimony
• Court fines and restitution
• Debts from fraud or intentional harm

If most of your debt falls in the "dischargeable" category, bankruptcy could give you a clean slate in 90 to 120 days.

Protecting Your Home in Bankruptcy

The fear is real: "Will they take my house?"

Most people who file Chapter 7 bankruptcy keep their homes. The reason is homestead exemptions, state laws that protect equity in your primary residence.

Here's how it works. Equity is the portion of your home you actually own (market value minus mortgage balance). If your home is worth $250,000 and you owe $200,000, you have $50,000 in equity.

If your state's homestead exemption is $100,000, your $50,000 in equity is fully protected. The bankruptcy trustee can't touch your house because the exemption covers it.

Homestead exemptions vary wildly by state:

• California: $600,000 for single filers (as of 2023)
• Florida: Unlimited (your entire home, regardless of value)
• Texas: Unlimited acreage limits, but full protection for urban/suburban homes
• New York: $170,825 to $250,000 depending on county
• Pennsylvania: Zero state exemption, but you can use federal exemptions ($27,900 in 2024)

Search "[your state] bankruptcy homestead exemption" to find your number. If your equity falls under that limit, your home is safe.

If you have significant equity above the exemption, Chapter 13 bankruptcy might be a better option. It lets you keep assets while repaying debt through a 3-5 year payment plan.

Medical Debt and Bankruptcy

Medical debt is the number one cause of bankruptcy in the U.S. A 2022 Kaiser Family Foundation study found 41% of adults carry medical debt, with a median balance of $2,000 to $2,500.

The good news: As of 2023, medical debt no longer appears on most credit reports. The three major bureaus agreed to stop reporting paid medical collections and to remove debts under $500.

The bad news: You still owe the money. Collectors can still sue, garnish wages, and freeze bank accounts.

Medical bills are unsecured debt, meaning Chapter 7 bankruptcy eliminates them completely. If you have $8,000 in medical debt from an ER visit or surgery, bankruptcy wipes that balance to zero.

One catch: If you're on a payment plan with a hospital and file bankruptcy, that agreement ends. The debt gets discharged, but you can't keep the payment plan. Most people find that trade-off worth it.

The Means Test: Do You Qualify for Chapter 7?

There's no minimum debt, but there is a maximum income. To file Chapter 7 bankruptcy, you must pass the means test, which compares your income to your state's median.

If your household income is below your state's median, you automatically qualify. If it's above, you may still qualify if your disposable income (after allowed expenses) is low enough.

Median income thresholds vary by state and household size. For example, in 2024:

• Single filer in California: $66,073
• Family of four in Texas: $99,568
• Single filer in Mississippi: $46,706

If you earn more than your state median, a bankruptcy attorney can calculate whether you pass the second part of the means test. The calculation accounts for secured debt payments (mortgage, car loans), taxes, health insurance, and other mandatory expenses.

Use our bankruptcy screener to see if you likely qualify.

What Happens After You File Bankruptcy?

Once you file Chapter 7, the automatic stay goes into effect immediately. This is a court order that stops:

• Collection calls and letters
• Lawsuits
• Wage garnishments
• Bank account levies
• Foreclosure proceedings (temporarily)
• Repossession attempts

The entire process takes about 90 to 120 days. Here's the timeline:

1. Day 1: You file bankruptcy. Automatic stay begins.
2. Day 30-40: You attend a 341 meeting of creditors (a 10-minute hearing where the trustee asks basic questions under oath).
3. Day 60-75: Creditors have a deadline to object (they rarely do).
4. Day 90-120: You receive your discharge order. Debt is eliminated.

Your credit score will drop initially (typically 130-200 points), but the bankruptcy falls off your report after 10 years. Most people see their scores rebound within 18-24 months if they build credit responsibly.

Bankruptcy vs. Debt Settlement

If you're considering bankruptcy, you've likely heard about debt settlement. Here's how they compare:

Debt settlement means negotiating with creditors to pay less than you owe (often 30-60% of the balance). It works if:

• You have a lump sum or can save one
• Creditors haven't sued yet
• You're dealing with one or two accounts

Debt settlement damages your credit (because you stop paying), but the hit is smaller than bankruptcy. Settled accounts stay on your report for 7 years but often disappear sooner.

Bankruptcy makes sense when:

• You have multiple creditors
• You've been sued or garnished
• You have no lump sum and can't realistically pay even a settlement
• You want legal protection (automatic stay)

Some people try settlement first and file bankruptcy if it doesn't work. That's fine. But if you're months behind and facing lawsuits, bankruptcy is often the faster, cleaner solution.

Filing Bankruptcy Without an Attorney

You can file Chapter 7 bankruptcy without a lawyer (called "pro se" filing). Court filing fees are $338 as of 2024, though you can request a fee waiver if your income is below 150% of the poverty line.

Several nonprofits offer free or low-cost help:

• Upsolve: Free software and support for Chapter 7 filers with income below median
• Legal Aid: Free attorneys for low-income filers (check your local chapter)
• Law school clinics: Supervised law students provide free representation

Pro se filing works if your case is straightforward (no assets above exemptions, no recent large purchases or transfers, no business debt). If you own property, have complex income, or face fraud allegations, hire an attorney. Mistakes in a bankruptcy filing can cost you your discharge.

Start by using our free bankruptcy filing guide to understand the process and gather documents.

When Not to File Bankruptcy

Bankruptcy is not always the right move. Skip it if:

• Your debt is already past the statute of limitations. Old debt can't be legally collected (though collectors may still try). Filing bankruptcy restarts the clock in some cases.
• You're judgment-proof. If your income is Social Security or disability, creditors can't garnish it. Bankruptcy won't improve your situation.
• You're about to inherit money or assets. Inheritances received within 180 days after filing become part of the bankruptcy estate.
• You recently made large purchases or cash advances. Debts from fraud (maxing out cards before filing) can't be discharged. Wait 90 days after your last purchase.
• You can realistically pay the debt in 2-3 years. If your income is solid and debt is manageable with a budget, bankruptcy may be unnecessary.

Talk to a bankruptcy attorney (most offer free consultations) before deciding. They can spot issues you might miss.

The Bottom Line

You don't need a specific debt amount to file bankruptcy. You need debt that's breaking your financial life. If you're drowning in payments, facing lawsuits, or using retirement savings to stay afloat, bankruptcy can reset your situation in under four months. Most people keep their homes, their cars, and their retirement accounts. What they lose is years of sleepless nights and mounting interest.