Certain rules limit Chapter 7 bankruptcy proceedings. Only some people are eligible for this relatively rapid form of bankruptcy. Additionally, the discharge available only applies to certain unsecured debts, such as credit card balances and medical bills.
Individuals dealing with high levels of debt and exploring their options may wonder if Chapter 7 bankruptcy can help them address all of their financial obligations. Perhaps they required uncovered medical treatment that left them with six figures in hospital bills, for example.
What are the debt limits that apply to a Chapter 7 bankruptcy?
There is no limit to a Chapter 7 discharge
Other forms of bankruptcy, such as Chapter 13 proceedings, have clear restrictions on the amount of unsecured and secured debt a filer can have while still qualifying. Chapter 7 bankruptcy does not impose any specific limit on financial obligations.
Anyone who passes the means test can potentially discharge as much eligible debt as they have accrued. Even people with hundreds of thousands of dollars in debt can potentially eliminate their legal obligation to repay what they owe through a successful Chapter 7 filing.
The only trade-off for the unlimited discharge potential of Chapter 7 bankruptcy is the possible need to liquidate assets to repay creditors. Thankfully, exemptions can help filers protect their most valuable resources.
For those with especially high levels of debt, Chapter 7 bankruptcy may be one of the best options available. Discussing personal debts and other financial details with a bankruptcy attorney can help people evaluate their options. Chapter 7 bankruptcy can be helpful for those with high levels of unsecured debts.