How Much Debt Do You Need to File for Chapter 7 Bankruptcy?

When financial storms brew, individuals may find solace in the legal shelter provided by Chapter 7 bankruptcy. However, the decision to file for Chapter 7 is complex, involving a careful evaluation of one's financial landscape. Let’s explore the eligibility criteria for Chapter 7, the amount of debt that might warrant its consideration, and examine some of the pros and cons associated with this significant financial decision.

illustration of man holding scale that's weighing debt to income ratio

The information is provided for educational and informational purposes only. Such information or materials do not constitute and are not intended to provide legal, accounting, or tax advice and should not be relied on in that respect. We suggest that You consult an attorney, accountant, and/or financial advisor to answer any financial or legal questions. You should consult with a bankruptcy attorney regarding any bankruptcy related questions you may have.  

Understanding Chapter 7 Bankruptcy 


Chapter 7 bankruptcy, often referred to as "liquidation" or "straight bankruptcy," involves the sale of non-exempt assets to pay off creditors. However, many filers do not have significant non-exempt assets, allowing them to emerge from the process with a clean financial slate. A key allure of Chapter 7 is the discharge of most unsecured debts. This includes credit card balances, medical bills, and personal loans, offering individuals a chance at a fresh start. 


Determining Eligibility for Chapter 7 


So, is there a specific amount of debt one needs in order to qualify for Chapter 7? 

The short answer is “no.” Unlike a specific dollar amount, the decision to file for Chapter 7 is more qualitatively driven. It hinges on the individual's ability to manage their debts, the impact on their financial well-being, and the feasibility of repayment. 


So, while there isn’t a specific number, there is an individual threshold. This threshold is often determined by the “Means Test,” which calculates disposable income by comparing it to the median income in a filer’s state and deducting allowed expenses from their income. If the filer’ disposable income is below the median, Chapter 7 may be an option. If above, further scrutiny is applied to their case. 


Pros of Filing for Chapter 7 


There are several advantages for individuals who file for, and meet the requirements of, Chapter 7… 


  • Immediate Relief: First and foremost, filing for Chapter 7 triggers an automatic stay, halting creditor actions such as foreclosure, wage garnishment, or repossession. This provides immediate relief to the filer. 
  • A Fresh Start: However, the primary advantage is the discharge of most unsecured debts, providing a clean financial slate. For individuals with no realistic means of repaying their debt, Chapter 7 offers a fresh start that enables them to rebuild their financial lives. 
  • Speedy Resolution: Additionally, Chapter 7 proceedings are typically quicker compared to other bankruptcy chapters. The process can be completed in a few months, offering a swift resolution for individuals who are eager to move on with their lives. 
  • No Repayment Obligations: Finally, since Chapter 7 focuses on liquidating non-exempt assets, filers often have limited or no repayment obligations beyond the assets that are sold. 

Cons of Filing for Chapter 7 


Of course, filing for Chapter 7 isn’t for everyone. Here are some potentially negative repercussions that it can have on individuals... 


  • Loss of Assets: Chapter 7 involves the potential loss of non-exempt assets. These may include valuable property, investments, or other possessions that are sold to repay creditors. 
  • Limited Exemptions: While exemptions exist to protect certain assets, they vary by state, and not all property may be exempt. 
  • Credit Impact: Filing for Chapter 7 results in a significant hit to the filer's credit score. Bankruptcy remains on credit reports for up to ten years, impacting the ability to secure credit at favorable terms. 
  • Public Record: Bankruptcy filing becomes part of an individual's public financial history, which may affect future employment opportunities. 

The Process of Filing for Chapter 7 Bankruptcy 


Keep in mind, there are restrictions on how often an individual can file for bankruptcy. For Chapter 7, there's an eight-year waiting period from the date of a previous Chapter 7 discharge. If you feel that you are eligible for Chapter 7, here are your next steps… 


  • Credit Counseling: Before filing, individuals are typically required to undergo credit counseling from an approved agency. This is to ensure that the debtor has explored alternatives to bankruptcy. 
  • Documentation: Proper documentation of financial details is necessary. This includes information about income, expenses, assets, debts, and recent financial transactions. 
  • Liquidation Process: In Chapter 7, a bankruptcy trustee is appointed to oversee the process. The trustee may sell non-exempt assets to repay creditors. 
  • Financial Management Course: After filing, debtors are required to complete a financial management course from an approved agency. 

It's crucial to consult with a bankruptcy attorney to understand specific eligibility requirements, exemptions, and the overall implications of filing for Chapter 7 bankruptcy based on your individual circumstances. 


Alternatives to Chapter 7 Bankruptcy


If you aren’t convinced that Chapter 7 is right for you, then consider debt relief. JG Wentworth’s Debt Relief Program has helped countless individuals manage, and resolve, their debt – without the need for bankruptcy. Here’s out it works… 


  • One monthly program payment: We start by working with you to assess your overall debt to determine if you qualify for our program. You then make just one monthly program payment into an account that you control with an insured financial institution. 
  • We Create Your Debt Resolution Program: After you enroll and set aside funds, our team of skilled negotiators works with your creditors on your behalf to lower each enrolled debt. We could potentially knock thousands of dollars off your total debt.  
  • We Negotiate on Your Behalf: As you accumulate money in your program account, we continue to negotiate with your creditors to settle your debts. The money in your program account goes toward paying off the settled debt amount, plus your program fees. 
  • 24/7 Support: We keep in touch every step of the way. Whenever there’s an update, we make sure to fill you in so you’re in the loop about your own finances. Our 24/7 online portal allows you to check your progress at your convenience. 

Our average clients become debt-free in as little as 24-48 months and save up to 51% on their total amount owed before program fee. If you feel like you could benefit from our Debt Relief Program, contact a representative today to discuss your options.* 


Call Now  855-688-9669 



Irby, L., “What Are Nonexempt Assets in a Bankruptcy Case?” The Balance. March 4, 2021. 


Hayes, A., “Means Test: Definition, How It Works, Examples.” Investopedia. May 10, 2023.


Brown, J. & Tarver, J., “How Long Does A Bankruptcy Stay On Your Credit Report?” Forbes. July 23, 2021. 


Wimmer, A., “What Is a Bankruptcy Trustee?” Upsolve. November 13, 2021.  


Cussen, M., “Life After Bankruptcy.” Investopedia. March 31, 2023.  



*Program length varies depending on individual situation. Programs are between 24 and 60 months in length. Clients who are able to stay with the program and get all their debt settled realize approximate savings of 51% before our 25% program fee. This is a Debt resolution program provided by JGW Debt Settlement, LLC (“JGW” of “Us”)). JGW offers this program in the following states: AL, AK, AZ, AR, CA, CO, FL, ID, IN, IA, KY, LA, MD, MA, MI, MS, MO, MT, NE, NM, NV, NY, NC, OK, PA, SD, TN, TX, UT, VA, DC, and WI. If a consumer residing in CT, GA, HI, IL, KS, ME, NH, NJ, OH, RI, SC and VT contacts Us we may connect them with a law firm that provides debt resolution services in their state. JGW is licensed/registered to provide debt resolution services in states where licensing/registration is required. 


Debt resolution program results will vary by individual situation. As such, debt resolution services are not appropriate for everyone. Not all debts are eligible for enrollment. Not all individuals who enroll complete our program for various reasons, including their ability to save sufficient funds. Savings resulting from successful negotiations may result in tax consequences, please consult with a tax professional regarding these consequences. The use of the debt settlement services and the failure to make payments to creditors: (1) Will likely adversely affect your creditworthiness (credit rating/credit score) and make it harder to obtain credit; (2) May result in your being subject to collections or being sued by creditors or debt collectors; and (3) May increase the amount of money you owe due to the accrual of fees and interest by creditors or debt collectors. Failure to pay your monthly bills in a timely manner will result in increased balances and will harm your credit rating. Not all creditors will agree to reduce principal balance, and they may pursue collection, including lawsuits. JGW’s fees are calculated based on a percentage of the debt enrolled in the program. Read and understand the program agreement prior to enrollment. 


JG Wentworth does not pay or assume any debts or provide legal, financial, tax advice, or credit repair services. You should consult with independent professionals for such advice or services. Please consult with a bankruptcy attorney for information on bankruptcy.