Do I Have Enough Debt to File Bankruptcy

How much debt do you need to file bankruptcy?  I am asked this question quite often.  The answer: “It depends on your situation.”  Everyone’s income and expense situation is different and so is the amount of debt they have.  A single elderly woman with a low fixed income from social security is in a completely different situation than a married couple with 2 or 3 kids and both spouses working.

Bankruptcy is a personal matter.  First of all you need to be comfortable filing for bankruptcy protection so you can receive a fresh start.  Secondly, it needs to make sense financially.

If you are an elderly woman (or man) receiving $1300.00 per month from social security, how much money do you have left over at the end of the month after you pay for the items you need to survive, such as food, shelter, transportation, and medical?  Do you have $50.00 left over at the end of the month?  How about $100.00?  Can you afford to continue making monthly payments on your credit card debt?  The answer is probably no.  You may only have $5000.00 in unsecured debt but you can’t live and make the minimum monthly payments.  Bankruptcy can help you.

Please note, in Ohio your social security benefits are generally protected from your creditors.  Your creditors will continue to call and harass you and they may even file a lawsuit against you in court.  Your social security benefits are still protected, but you have to take steps to ensure they don’t get snatch up in a bank garnishment.  I explain this issue to many clients and most of the time they decide to file for bankruptcy protection for peace of mind.

What if you’re a single parent with a couple kids.  You have a job and your making $60,0000 a year.  Your gross monthly income is $5000 per month.  Your monthly income is significantly more than the elderly woman.  But so aren’t your monthly living expenses.  Children are expensive.  In terms of the amount of unsecured debt that pushes you over the edge, well it may only be five to ten thousand dollars.  After you take care of living expenses can you make the minimum monthly payments on your credit card debt?  If the answer is no, then bankruptcy can help you.

Let’s not forget the married couple.  You and your spouse have two kids, maybe three.  Your gross income is $80,000 per year or $6700 per month, maybe more.  Your living expenses may not seem like they are that much more than the single parent, but you probably have a larger mortgage or rent payment and an additional car.  You possibly have less than $1500 in the bank.  It seems like you never have any extra money.  Here, like the examples above, it really does not take much unsecured debt to make your financial life miserable.  Can you dig out of the debt without filing bankruptcy?  Maybe, but you have to stop using credit cards, go to a cash system, and have enough money left over at the end of the month to pay more than the minimum monthly payments to your credit card debt.

Sometimes it only takes one creditor to file a lawsuit and ruin your finances.  When a creditor wins the lawsuit it can then take legal action to collect on the debt.  That creditor can now garnish your wages and/or garnish your bank account.  Both of these situations will make your life miserable.  In that instance, filing for bankruptcy protection generally makes a whole lot of sense.

So how much debt do you need to file for bankruptcy protection depends on your personal circumstances.  If you live in Central Ohio and are struggling to make end meet, feel free to give me a call.  We will discuss your situation and find out if you have enough debt to file bankruptcy.

Wage Garnishment-How Much Can Be Garnished?

Wage garnishments can be very painful.  They greatly reduce your ability to continue to provide the necessities of life for you and your family.  They are a legal remedy your creditor obtains from the court to ensure they are paid the money you owe them.

In Ohio you typically will receive a notice of wage garnishment.  The wage garnishment will take 25% of your paycheck after taxes have been deducted.  This is a significant amount.  It will put a major strain on your household budget.  It will most likely cause you to fall behind on your car payment, your rent or house payment, or your utility bills.  It may also cause you to not be able to provide the necessities for your family such as food, clothing, and medical needs.

Below is an example of how a wage garnishment will reduce your available monthly income for a person earning $30,000 per year:

.                                                        Before                         After

Monthly Gross Income           $2500                          $2500

Required Taxes                          $500                            $500

Garnishment                                N/A                             $500

Insurance                                    $250                            $250

Available Income                    $1750                          $1250

As you can see, the garnishment for the example above reduced the available monthly income by $500 per month.  If your budget is already tight, that means you will not be able to maintain your household necessities.  You are going to begin to miss payments on your car, rent/mortgage, or utilities.  Your family is going to suffer.  Please contact a local bankruptcy attorney to find out how you can stop a wage garnishment.

Wage Garnishment

A wage garnishment is a legal method a creditor uses to collect the money you owe them.  Generally this follows a lawsuit to collect the debt.  Once the court has determined that the debt is owed, the creditor has a legal remedy to collect the debt by ordering your employer to withhold money from your paycheck.  In Ohio, wage garnishments take 25% of your paycheck after taxes.

Bank Garnishment

A bank garnishment is a legal method a creditor uses to collect the money you owe them.  Generally this follows a lawsuit to collect the debt.  Once the court has determined that the debt is owed, the creditor has a legal remedy to collect the debt by ordering your bank to freeze all your assets and turning them over to the court.  Currently in Ohio, an individual can protect $425.00 from being garnished from his or her bank account.