If I can make payments, am I still eligible for bankruptcy?

In today’s world, it is not difficult for debt to spiral and become a major dilemma.

Perhaps you can make the minimum payments on your credit card and other pressing loans, but debt can still pile up quickly and become unmanageable. Many people in this situation worry about whether they can still file bankruptcy.

It is true that paying off debt before bankruptcy can cause problems

According to Kiplinger, one thing you should avoid before filing bankruptcy is excessive spending. We have also discussed this in previous blog posts. Gaining new debt just before filing bankruptcy can cause issues and hinder your ability to file for bankruptcy.

Additionally, paying off debt can also create challenges for you. Even though getting rid of debt is the overall goal of bankruptcy, making payments or paying off personal debts beforehand can complicate your effort to obtain debt relief.

Should you stop paying debts altogether?

Not necessarily. However, it is important to note that this is a complex matter when it comes to bankruptcy.

For example, you must qualify to file for Chapter 7 bankruptcy through the means test. The purpose of this test is to calculate and determine that an individual cannot repay their debts. This can leave you in a complex situation. After all, you do not want your debt to get worse, but you also want to qualify for the debt relief you need.

So, what should you do?

There are two things to consider:

  1. If you already make regular payments on existing debts – regardless of the amount – you do not have to stop making these payments. The primary thing to avoid is creating new debt.
  2. The ability to make small payments does not necessarily prevent you from filing bankruptcy. You may still be able to qualify for Chapter 7 or Chapter 13 bankruptcy. Chapter 13 can help you catch up on missed payments and repay debt with a plan that still protects you, your finances and your assets in the long run.

Struggling with debt and considering bankruptcy can feel overwhelming – especially when you consider all of the particular rules and requirements surrounding the bankruptcy process. This is why it is often helpful to consult an experienced bankruptcy attorney proactively to make sure you know what to expect as you seek debt relief.