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How much debt do you have to be in to claim bankruptcy?

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The actual amount varies from situation to situation, but the general rules used to consider claiming bankruptcy are summarized as follows:
* The amount owed to creditors must be greater than that held in marketable assets (e.g., bank accounts, car, 401k, etc.)
* The income (after taxes and required living expenses) of the debtor(s) does not cover the minimum amount of principal and interest necessary to pay off all debt in a "reasonable amount of time" (for non-primary real estate assets, people use seven to ten years)
* You have made a very strong attempt to reduce your living expenses to only the necessities
* You have been unable to negotiate a workout with one or all of your creditors

Bankruptcy is a last resort. You will keep your home (if you don't own it outright, if you do, you will end up having to get a mortgage to pay off creditors) and may keep a vehicle, but that is it. You will not be able to get credit for at least seven years following the event, making major life changes difficult (e.g., a new baby, marriage, school, etc.).

If you are considering bankruptcy, see a credit professional in order to be sure that bankruptcy is your only route to debt freedom.
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