There are a lot of myths surrounding bankruptcy, about what it can or can't do, who can file, who can't, that you can except certain debts, etc. Two of the more pervasive myths are (1) that you need a minimum amount of debt in order to file and (2) that you have to repay all your debts in Chapter 13. Both are false.
Anyone can file bankruptcy with any amount of debt. In theory if you owe someone $25 you can file, though you'd probably be committed because the filing fee is $306. But the truth is, there is no minimum amount of debt required. Whether you file is a personal decision. For some people, $5,000 is too much debt. For others, $500,000 is not too much. It all depends on the individual.
When it comes to Chapter 13, you do not have to repay all your debt. It would be a foolish program if it required full repayment. Think about it. If someone can't repay their debts NOW, how are they going to be able to repay them in only 60 months, the maximum time allowed under Chapter 13? What Chapter 13 does is look at what you can afford to pay and require you to pay that for the length of the plan, which is 36 or 60 months, depending on a number of factors. At the end of the plan, any remaining debt is discharged, just like in a Chapter 7. But Chapter 13 has advantages over Chapter 7: There is no means test, which disqualifies some debtors from Chapter 7; you get to keep assets that you might otherwise lose in Chapter 7 (such as cars, houses, stocks, etc.); and some debts that can't be discharged in Chapter 7 can be discharged in Chapter 13.
