If you're overwhelmed with debt, there's still hope. Our automated software will help you resolve your debt and move forward.

How Much Debt Do I Need to File Bankruptcy?

Written by Hannah Locklear

Hannah Locklear

Editor

Hannah Locklear is SoloSuit’s Marketing and Impact Manager. With an educational background in Linguistics, Spanish, and International Development from Brigham Young University, Hannah has also worked as a legal support specialist for several years.

See full bio

Last updated on May 13, 2026

Summary: There's no minimum debt amount required to file bankruptcy. The decision depends on whether debt is preventing your financial progress. Chapter 7 bankruptcy can eliminate credit card debt, medical bills, and personal loans while protecting your home through state exemptions. Solo can help you respond to debt lawsuits, and bankruptcy may be an option if debt settlement isn't enough.

Are you staring at a pile of bills and wondering if bankruptcy is your only way out? You're not alone. Every year, hundreds of thousands of Americans consider bankruptcy as a solution to overwhelming debt, but many don't know where to start or if they even qualify.

Ben Jackson, co-founder of Upsolve, America's largest bankruptcy nonprofit, recently joined The Debt Hotline to answer real listener questions about filing bankruptcy. Having personally eliminated $60,000 in debt through Chapter 7 bankruptcy, Ben knows firsthand how the process works and when it makes sense.

Here's what you need to know about bankruptcy, protecting your assets, and getting a fresh financial start.

Struggling with debt? Use Solo to settle it for less.

SoloSettle

4.7 (635)

Settle your debt for a fraction of what you owe

SoloSettle negotiates directly with creditors — no lawyers, no fees upfront.

$2.5B+

Protected

~40%

Avg. Savings

3 min

To Start

"Well worth it. I could not have done this without assistance."

Jerry S. Verified

Make an Offer Now

No credit card required · Takes 3 minutes

There's no minimum debt requirement for bankruptcy

One of the biggest misconceptions about bankruptcy is that you need a certain amount of debt to qualify. The truth? There's no minimum.

"The decision to file bankruptcy depends less on your total debt and more on whether that debt is holding you back from financial progress," Ben explains.

Some people file bankruptcy with $5,000 in debt, while others wait until they owe $100,000 or more. The key question isn't "How much do I owe?" but rather "Is this debt preventing me from moving forward financially?"

If you're paying minimum payments on credit cards with no end in sight, or if medical bills are consuming your entire paycheck, bankruptcy might make sense regardless of the total amount.

Respond to debt collection lawsuits fast with Solo.

Can bankruptcy protect your home?

This is probably the most common question about bankruptcy, and one of our listeners, Robin, wanted to know: "Can you file bankruptcy and have it not affect your home?"

The answer is often yes, thanks to something called exemptions. These are state laws that protect certain property from being taken during bankruptcy. Ben explains:

"Your home has equity—that's the portion you actually own after subtracting any loans. When you file Chapter 7 bankruptcy, that equity could potentially be taken to repay creditors. But there are tons of protections called exemptions that vary state by state."

For example, if your state has a $200,000 homestead exemption and you only have $150,000 in equity, your home is completely protected. The bankruptcy trustee won't take your house because the courts recognize you need a place to live.

To find your state's exemptions, search online for "[your state] bankruptcy exemptions." You'll likely find detailed information about what property is protected in your area.

Savings Calculator

How much could you save each month?

Your total debt

$10,000

$3,000 $50,000

Credit card payments

$287

/month

at 24.99% APR
for 5+ years

With SoloSettle

$172

/month

settle for less
resolve in months

You save $115 /month

Make an Offer Now

Credit card payment estimated at 24.99% APR over 60 months. Settlement estimate based on industry averages. Actual results vary.

Medical debt is typically eliminated through bankruptcy

G from Georgia called in with a medical debt situation that many people face. She had a payment plan with a medical provider, but when her finances changed and she couldn't make the full payments, the debt went to collections.

"Medical bills and collections are so frustrating," Ben acknowledges. "I've been in situations where I had something I didn't even realize I owed and it went to collections."

Here's what G (and anyone facing medical debt) needs to know:

Good news: Medical bills generally don't report to credit bureaus anymore, so they won't hurt your credit score.
Bad news: You still owe the money, and collectors can still sue you, garnish wages, or freeze bank accounts.

The solution: Medical bills are unsecured debt, meaning they can be eliminated in Chapter 7 bankruptcy, with certain exemptions such as medical fraud. Since medical events precede about 90% of bankruptcy filings, you’re definitely not alone if medical bills pushed you toward considering bankruptcy.

Bankruptcy can stop foreclosure immediately

Rose asked whether bankruptcy can stop foreclosure, and Ben had encouraging news: "Yes, it definitely can."

The moment you file bankruptcy, something called the "automatic stay" goes into effect. This immediately stops:

Foreclosure proceedings
Wage garnishment
Collection calls
Lawsuits
Bank account levies

"A lot of times people find that once they file, they're able to breathe even before their bankruptcy clears because they just stopped getting calls," Ben notes.

In Chapter 7 bankruptcy, the pause is usually temporary (a few weeks to a few months), but if your debt gets discharged and your equity is protected, the foreclosure could stop permanently.

Chapter 13 bankruptcy works differently. You typically get a three to five-year plan to catch up on missed payments while keeping your home.

Important note: If there's fraud involved in the foreclosure proceedings, those could potentially continue even during bankruptcy.

What debts can't be eliminated through bankruptcy?

While bankruptcy can wipe out most unsecured debts, some obligations survive the process. These non-dischargeable debts include:

Student loans: Federal and private student loans typically can't be discharged, though there are rare exceptions for "undue hardship"
Recent taxes: Income taxes less than three years old, and any taxes where you filed late or committed fraud
Child support and alimony: All domestic support obligations remain in full
Recent luxury purchases: Credit card charges over $800 for luxury goods within 90 days of filing
Recent cash advances: Credit card cash advances over $1,100 within 70 days of filing
Court fines and criminal restitution: Traffic tickets, criminal fines, and victim restitution
HOA fees: Homeowners association fees that continue after filing
Some secured debts: Car loans and mortgages can be kept if you continue payments, but the debt itself doesn't disappear

Understanding which debts survive bankruptcy helps you make informed decisions about whether filing makes sense for your situation.

How bankruptcy affects your credit and recovery timeline

Many people worry that bankruptcy will ruin their credit forever, but the reality is more nuanced and often more hopeful than expected.

Credit report timeline:

Chapter 7 bankruptcy appears on your credit report for 10 years
Chapter 13 bankruptcy appears for 7 years
Individual accounts included in bankruptcy typically fall off after 7 years

Credit score recovery: Most people see their credit scores start improving within 6-12 months after discharge. This happens because:

Your debt-to-income ratio improves dramatically
You're no longer missing payments on discharged debts
You can focus on rebuilding rather than just surviving

Rebuilding strategies:

Secured credit cards: Use these to establish new positive payment history
Credit builder loans: Small loans designed specifically for rebuilding credit
Authorized user status: Ask family members to add you to their cards
Pay all remaining obligations on time: Utilities, rent, car payments, etc.

"Once that debt's gone, your credit score ends up going up and your finances end up going up just because you're so much less stressed," Ben explains. "Happy people tend to be prosperous people."

Many people find they can qualify for an FHA mortgage just 2-4 years after bankruptcy discharge, especially if they've been rebuilding credit responsibly.

Different types of bankruptcy serve different needs

Understanding the difference between Chapter 7 and Chapter 13 bankruptcy is crucial:

Chapter 7 (Fresh Start): Your unsecured debts (credit cards, medical bills, personal loans) disappear entirely. This is what most people think of as "bankruptcy." The process typically takes three to six months.

Chapter 13 (Payment Plan): You create a three to five-year plan to pay back a portion of what you owe, usually less than the full amount. You keep your property but must stick to the payment schedule.

Which one is right for you depends on your income, the urgency of your situation, and what property you need to protect.

Let's consider an example

Example: Lisa from California had $45,000 in credit card debt, $12,000 in medical bills, and a $3,000 payday loan. She was making minimum payments, but the balances never went down due to high interest rates. Her house had $180,000 in equity, and California's homestead exemption is $600,000.

Lisa filed Chapter 7 bankruptcy through Upsolve. All her unsecured debt disappeared completely, her house was fully protected by exemptions, and she paid only the $338 court filing fee (which was waived due to her income). Six months later, she was debt-free and able to start rebuilding her financial future.

Consider the statute of limitations before filing bankruptcy

Jessica from Indiana had successfully vacated a default judgment but wondered about the statute of limitations on her debt. This raises an important point about alternatives to bankruptcy.

If the statute of limitations has expired on your debt (typically six years in Indiana for credit card debt), you may have a complete defense to any lawsuit. Solo offers a free statute of limitations calculator that can help you determine if your debt is too old to collect.

The key factor is usually your last payment date. If you haven't made a payment in over six years, the debt may be legally uncollectible.

Build wealth after eliminating debt through bankruptcy

One of the most encouraging aspects of Ben's advice involves what happens after bankruptcy. He recommends following these steps:

Eliminate the debt (through bankruptcy if necessary)
Settle any remaining obligations
Build a $1,000 emergency fund
Automate investments in index funds
Boost credit score to 800
Prosper

The investment step is particularly powerful for building long-term wealth. Even modest amounts can grow substantially over time through compound interest.

For example, investing just $300 per month in a diversified index fund earning 8% annually could grow to over $440,000 in 30 years.

The key is starting as soon as possible after bankruptcy discharge. Many people find they have more disposable income immediately after bankruptcy than they've had in years since they're no longer making minimum payments on credit cards or dealing with collection calls.

Consider alternatives when bankruptcy isn't the right solution

Bankruptcy isn't always the answer. Before filing, explore these alternatives that might resolve your debt situation:

Debt settlement: Negotiate with creditors to pay a lump sum that's less than what you owe. Many collectors will accept 30-60% of the original balance to close the account.
Payment plans: Contact creditors directly to arrange affordable monthly payments. Many will reduce or eliminate interest if you stick to an agreed schedule.
Debt consolidation: Combine multiple debts into one loan with a lower interest rate. This works best if you qualify for a personal loan with better terms than your current debts.
Statute of limitations defense: If your debt is old enough (typically 3-6 years depending on your state), you may have a complete legal defense against collection lawsuits.
Credit counseling: Nonprofit credit counseling agencies can help you create a debt management plan and sometimes negotiate lower interest rates with creditors.
Hardship programs: Many creditors offer temporary payment reductions or deferrals for people experiencing job loss, medical issues, or other financial hardships.

Consider these alternatives if:

Your debt is manageable with a settlement plan
The statute of limitations has expired
You can afford monthly payments that actually reduce the balance
Your main debts are secured (car loans, mortgages) that you want to keep

Settle your debt for less with SoloSettle.

How to get started with bankruptcy

If you're considering bankruptcy:

Determine if you qualify: Visit upsolve.org for a free screening tool
Understand your state's exemptions: Research what property you can protect
Consider timing: Filing too early or too late can affect your options
Gather documentation: You'll need income records, debt statements, and asset information

For immediate debt collection issues, Solo can help you respond to lawsuits properly and negotiate settlements with collectors.

The bottom line

There's no magic debt number that makes bankruptcy right for everyone. The decision depends on your specific situation: Are you making progress paying down debt, or are you stuck in a cycle of minimum payments with balances that never decrease?

As Ben puts it: "Would it be right for me to figure out how to get out from under this debt? Where could I be in 10 years if I was paying myself the interest instead of paying credit card companies?"

Bankruptcy offers a legal fresh start for people overwhelmed by debt. It's not a moral failing. It's a financial tool designed to help people get back on their feet. Whether you owe $5,000 or $50,000, if debt is preventing you from moving forward financially, bankruptcy might be worth considering.

Remember: You are not your debt. Your credit score isn't a measure of your worth as a person. It's simply a tool banks use to evaluate lending risk. Focus on building real wealth and financial stability, not just improving a number on a report.

If you're facing debt collection lawsuits while considering bankruptcy, respond properly to protect your rights. Solo can help you file the necessary court documents and explore all your options for resolving debt and moving toward financial freedom.

Transcript

George (00:02):

If you open the mailbox and there it's a debt collection letter, suddenly your heart sinks. What do you do next? This is the Debt Hotline hosted by Team Solo. Whether you're here for crazy real life debt stories or tips on resolving your debts for good, you've come to the right place. I'm George, founder and CEO of Solo, the trusted platform that's helped hundreds of thousands of people respond to debt lawsuits and resolve debt. Join us weekly to hear from debt experts, debt collectors and debt survivors. No shame, no judgment to straight answers, and a fresh start. Alrighty folks, I am George with Solo. I'm one of the founders and today we have Ben Jackson on the show with us. Hello, you tell us a little bit about yourself, Ben.

Ben (00:48):

Yeah, of course. Stop me. I usually go long-winded on this. So my name's Ben Jackson. I'm one of the co-founders of Nonprofit Upsolve and what we do at Upsolve is we help people break free from their debt that they can get that burden off their shoulders and make their hard work actually work for them again. But yeah, we help people file bankruptcy, break free from debt and get back on their feet financially. And I do this work because about 60 years ago I had $60,000 in credit card debt and I was only making $20,000 a year hustling for Uber or Lyft, Instacart, wherever I could make a buck and it wasn't working and I was like, there's got to be a way out of this. There's got to be a way to get out of that debt spiral and get back on my feet and it was called chapter seven bankruptcy. It let me restart. And so I've now dedicated my career to helping other people access that really awesome legal tool as well. We do that for free at Upsolve and that's what I'm here to talk about today. Fantastic,

George (01:44):

Well very glad to have you on the show and a little bit more about Ben. He is the co-founder of Upsolve. It's the largest and most impactful bankruptcy nonprofit in America has helped more than 13,000 people find freedom from over $700 million of debt. He has a law degree from Chicago Kent College of Law and he has personal experience filing chapter seven bankruptcy and freeing himself from the burden of debt and he is a regular on the debt hotline. So Ben, very glad to have you here folks. If you have questions, you can call into the hotline at (801) 613-8181 and you can ask any of your burden questions. You can ask about debt lawsuits, competing suit for debt. You can ask about bankruptcy, you can ask about credit repair, you can ask about buying houses, personal finance tips, whatever you want to ask about. Go ahead and call into the hotline, leave us a voicemail there and we'll make sure that you get onto the show and that we answer your question. Let's go ahead and start off with the question here from Robin. Can you file bankruptcy and have it not affect your home?

Ben (02:57):

Yeah, this is a great question. So just starting with a traditional disclaimer, right, not a lawyer, not legal advice, not financial advice from me either. This is really just insights from what I've learned over the years of working with these thousands of people who filed bankruptcy. So as relates to your home, your home has something called equity, right? Like you have a loan, you owe a certain amount on that loan and as you pay it off, your equity increases. That's the portion of the home that you own. So when you file a chapter seven bankruptcy, which is the type that upsell will help with that equity could potentially be taken to repay your creditors. Now there are tons and tons of protections. Those protections vary on a state by state basis and those are called exemptions. So if you go on Google and you say state of, let's say you live in Arizona, state of Arizona bankruptcy exemptions, odds are you're going to find a link to an Upsolve article that explains what the homestead exemption or the home exemption is in your state.

And let's say that that was $200,000 and you only had $150,000 in equity, that equity is usually going to be protected, meaning the trustee's not going to take your home and sell it in the bankruptcy proceedings to pay your creditors because the courts say by law there's an amount that you're allowed to keep that's protected, that's considered necessary for living. So if your home equity is covered by exemptions, you're almost always okay. Now, you can also often if you're working with a lawyer, work through something with the trustee and through the bankruptcy judge to potentially defend more than that In certain instances, you can also look into filing different types of bankruptcy like a chapter 13 bankruptcy where you have a repayment plan. Usually it's less than the amount that you owed and you don't have a total liquidation of your assets and without boring you, the distinction between the two chapter seven's, fresh start your debt, credit card debt, personal loans, anything that's not secure with property goes away entirely. Chapter 13 is a payment plan over time, which one is right for you is going to depend on the urgency your needs in the property you have and you can find out@Upsolve.org which will work for you and make sense in those circumstances. So thanks for the question.

George (05:14):

Great response, Ben. Thanks for clarifying that. So folks, that's the things you need to know on making sure bankruptcy doesn't impact your home. Alright, we have a question from someone who called in on the ice.

Guest #1: G (05:31):

Hi, my name is G and I have a question. I have a medical bill. I'm in the state of Georgia and I have a medical bill where I had a payment plan that I was paying on a monthly basis, but then my finances had changed because I have no longer been working and I sent payments lower than what was on the payment plan for two consecutive months. I asked them to lower my payment plan, they refused, so I sent what I could afford and now they have collections company calling me, what should I do with this situation? I also was told that they no longer can put credit bills on your credit. They no longer can put medical bills on your credit report. So can you give some advice as to what should I do with the situation since it's very stressful on me and the medical bills never even the medical, never even rectifying my problem, which I am still dealing with and it's causing a lot of stress on me. I really need some help because I'm just really going through a lot. Thank you.

George (07:03):

Alright, that is question from G who called in on our hotline who sounds like she is having an issue with a medical bill that she was on payment plan for, but now she's going into collections. Ben, what do you think?

Ben (07:18):

Yeah, man, gee, I'm sorry you're dealing with that. Medical bills and collections and debt are so frustrating and so confusing. I think about money and debt all the time and I've been in many situations where I had something that I didn't even realize I owed and it went to collections. So been where you are, you can definitely get out of it. So let's talk about that. So you said something interesting which is that medical bills don't get reported to credit bureaus and that's true. That is a new thing I believe that went into effect last year and that means that if you don't pay that it's in collections. It's not going to reduce your credit over time. That's the good news. The bad news is you do still have to pay it. This isn't like a free ticket out of it. Some things that'll happen if you don't pay, you're still likely going to get calls, potentially even harassing calls from debt collectors, the provider that you owe the money to or the debt collector that bought that debt from them could still sue you and if they win they could garnish your wages or even freeze your bank account.

And so it's still really important to take care of that debt in some way or another and it could cause you a lot of financial stress. Still, I can tell just listening to you that this is something that really stresses you out even though it doesn't affect your credit score. So it's really important to find a way to get rid of that debt. Now I know you're in Georgia, you can do this all over the country, including in Georgia. You can include your medical bills in a bankruptcy filing because it's an unsecured debt, meaning it doesn't have a house, a car or something like that, securing it. So if you do need to get out of debt and you're thinking bankruptcy could be a good fit for you, check out Upsolve.org. Our tool will tell you if this is something that could be included in your bankruptcy proceeding and you may actually be able to get out from under that medical debt entirely.

George (09:08):

Fantastic. Yeah, great tips. Ben, I'm curious to hear your take on the industry right now. Which one? What I've heard is that on the debt collection industry, what I've heard is that the rule around not reporting medical debts to the bureaus was based on the change that was being implemented by the CCF PB. Now that the CFPB has largely shut down, the change isn't really being implemented and now for a large part people are pretty regularly reporting medical debts to the bureaus still. Have you seen that? Have you seen anything in that regard? What I've heard,

Ben (09:49):

So I've heard it, I definitely haven't seen it show up on the credit reports. I'm not looking at them as often day-to-day as I used to. You are now sending me to our credit reports to see if I can find something immediately after this call. I've definitely heard this not to get political, but I would never bet money in any direction or another on the Trump administration. I just don't know where things are going to go, but it does make sense that that would get repealed given a lot of their other economic policies or at least ignored. CFPB is an administrative agency, they're responsive to the executive branch and so they could change course all that to say what I've found working with people is you really just want to make the decision that is right for you financially right now based on the facts on the ground.

So when I see people try to make decisions about their debt based on does this affect my credit score or not, what I often notice with people is that because their debt is still sticking around whether or not it affects their credit score, that weight stays on their shoulders and they really, really struggle to ever get out from under it. And the cool thing that we hear people tell us all the time is as soon as that debt's gone, your credit score ends up going up, your finances end up going up just because you're so much less stressed out and happy people tend to be prosperous people. So I would encourage you if you are worried about what's going on politically and the credit effects of that, potentially set that aside for a second and say, would it be right for me to figure out how to get out from under this debt? Where could I be in 10 years if I was paying myself the interest on my own money instead of paying the credit card interest on that money?

George (11:34):

Okay, happy people are prosperous people

Ben (11:37):

Tend to be, yeah,

George (11:38):

And I would add you are not your credit report. Exactly. Your credit report isn't a complete picture of your debts or your financial position. A credit score is not a score of your financial health. Credit score is just a score that banks use to try to score your solvency, which your solvency, your ability to pay back debts probably isn't to you your number one factor of personal financial health, right? You probably as a consumer or G, right? I'm talking to G. Probably what you care about most is really your net worth in your financial position you want to find out has been saying how can you pay yourself just because your credit score might one day get up to 800 is not necessarily what you're really aiming for your financial health. You want to get up to a more positive net worth so you have more money than you owe.

Ben (12:40):

Absolutely.

George (12:41):

Right? And that won't necessarily be reflected on the credit report even if medical debt isn't, whether it is on the credit report or it's not, it's up to you to determine if you owe that debt and if you're going to pay that off. We have another question here from Dave in Tennessee.

Guest #2: Dave (13:02):

Hi, my name is Dave. I live in Tennessee. I'm currently being sued by Javitch Block. I live in a house once owned by my parents, both of which are deceased. I still live in the house. I'm an only child. The house was willed to me. However, upon the death of my last parent, I did not probate. I did not have the money at the time. The deed is still in their name and there is no mortgage on the house.

Javitch block is trying to go for a default judgment on me. We have not been to court on that yet, so I'm wondering, given the fact the house is in their name, not mine, even though I live there, can Javitch block go after the house? Two part question. Second part of it is if I need more time when I go to court, even though they're trying to get a default judgment, can I ask the court for 60 days more? I feel like if I have more time I could possibly get something worked out with them. Thank you, I appreciate it.

Ben (14:16):

Complicated situation. That is a George question, not a Ben question.

George (14:20):

I will say that sounds like one of the tougher questions we've heard on the show. I will say. So just reviewing the facts here. So Dave's in Tennessee, he inherited a house kind of from his parents who are deceased. Sorry to hear your parents passed away, Dave and he is in this house now. It seems like somehow he skipped probate in Tennessee. I'm not exactly sure what that means, but now he's being sued by a debt collection law firm, which is Javitch Block. They're a large law firm. We work with them quite a bit at solo and again, we maintain good relationships with all collectors to make it easier for everybody who's coming to solo to resolve their debt. And so he is being sued by Javitch Block. I was like maybe they're coming after the house. Bury was in the lawsuit here. Ben has, he just started the lawsuit.

Ben (15:15):

He said that they're going for a default judgment, but he hasn't been to court yet, so I'm guessing there was a court date that was missed or something.

George (15:23):

I guess he's just wondering if his house is at risk, right? So answer, answer easy. Part of the question here to answer Dave is that if you own the house, the house is that risk. Yeah, they'll be able to get a lien against the house if they get a default judgment against you. And that means if you sell the house in the future, then the proceeds from the sale will go first to the debt collector in line who has the lien on the property. So if you sell the house for $500,000, you have a $10,000 debt and $10,000 from that sale will just go right to the collector through the court process and the lien. I'm

Ben (16:03):

Curious, George, is that going to happen still? I know you said the titles in their name, the mortgages in their name. I'm curious if there's an assumption that that house is his property such that it could be seized in that lawsuit. Is that how that works?

George (16:16):

Yeah, so that's the tough question. Is the house yours? I think the question is what do you mean when you skip probate? I'm not a specialist in this matter, but I'm not really sure that you can skip probate, right? So the idea here is folks, if you're listening in, if you don't have a will, you should get a will. Even if you're 30, go get a will.

George (16:41):

You can get a template. Will lots of places online pretty straightforward. It can feel pretty complicated, but just get some kind of a will is better than no will at all. Even if you write on a piece of paper saying all of my property will go to my son and then you sign to George Simmons, yeah, you can make me up. Even if you just write that down and sign it, that'll be better than not having any will because if you don't have a will and you die, then your estate, all of your possessions go into probate process, which varies from state to state. Basically that means the state courts will assign people to execute on your estate and a lot of the estate will just get eaten up in state court costs. So if you don't have a whole lot of possessions, most of the estate will just disappear in the executive process that takes place from the state. So Ben, do you have any idea what this means in that it sounds like they didn't have a will and so it sounds like who owns the house? I don't know.

Ben (17:53):

I mean if I had to guess you do, the court's probably going to look at Indic ownership like who's been paying the mortgage for how long is there? There's something called an adverse possession law where if you live in a place and it's obvious you live in the place and you're staking claim to it, even if it belongs to somebody else after a term, it belongs to you. So there's all these considerations that would potentially make it yours, but let's just say hypothetically it isn't and the debt being collected on is right in that world, then there's a chance that the debt collector wouldn't be able to take the house. Really the important thing is to talk to a probate attorney in Tennessee because if this does belong to you, then it is at risk. That's the simple version. But yeah, this is a super complicated and interesting question, so thanks for asking it.

George (18:48):

Yeah, probate can't be skipped. It just happens whether you go resource, trying to think whether or not you show

Ben (18:57):

Someone owns the house, it'd be good to figure that out,

George (19:00):

Right? And it'll probably be you, but maybe not. Again, if the proceeds drag on and cost get eaten up in the execution of the estate, maybe the house isn't owned, maybe actually owe a portion of the house to the state for legal fees for executing

Ben (19:21):

On the estate of your appear. So definitely something. Look, the thing I mentioned earlier about exemptions as well, some portion of the value of that house, your equity in that house would be protected by the state exemption laws as well if it does belong to you. So worst case scenario, if you lose some of the value of the house.

George (19:39):

Yeah, so Dave zooming out a little bit, right? You probably want to get this debt settled, whether or not they are able to come after the house, you want to get the debt settled. If you recognize the debt, you agree that you owe some portion of debt, you can make an offer to get it settled on solo settle and wrap things up. With Javitch Block. We work with them quite closely on a lot of these resolutions. If you have a lot of debt coming in the pipeline, you can also consider bankruptcy. Right UPS all a great choice for bankruptcy. Question from Rita. I carry a lot of cash, payday loans, medical bills and loans I took out due to being off work due to a knee replacement. Looks like she didn't necessarily ask a question along with that. She's just saying as she has that going on. Rita, let's just say you want to get out of this position then what can Rita do to improve her financial position here?

Ben (20:38):

Well, first thing is to recognize you're definitely not alone. Most of the people that file bankruptcy, something like 90%, it's proceeded by some sort medical event or major life change. So story as old as time. Rita, I feel sorry for you, but I also feel like you're in good company. So the things that you have going on in this state, payday loans, medical bills and loans you took out due to being off work. So payday loans for sure can be included in a bankruptcy proceeding. They'll go away as long as there's no fraud involved in that. Same with medical bills, the loans you took out due to being off work, that's going to depend on if they're secured by anything. If you said, Hey, I'm getting $10,000 from SoFi in order to get this $10,000 and putting out my car as collateral, that would be a secured loan, meaning they could take your car if you stop making payments on it. That type of debt won't go away in a bankruptcy proceeding. But if it was just a normal loan, personal loan, cash loan, something like that, then generally speaking you can get out of that in a chapter seven bankruptcy or negotiate a repayment plan for that at a lower rate in a chapter 13.

George (21:51):

Yep, all solid tips here. Thank you Ben. Let's go on to the next question, and this is from Rose and a foreclosure Be stopped by bankruptcy.

Ben (22:04):

This is one of my favorite questions. So yes, it definitely can. And in chapter seven, that pause is usually temporary. What happens is called the automatic stay. So as soon as you file it, all lawsuits, all collection activities, all of the sorts of things sort of go on pause until the trustee and the bankruptcy case can figure out how to divvy up assets to pay people off. It's a nice rest. A lot of times people find that once they file, they're able to breathe even before their bankruptcy clears out the way their debt because they just stopped getting calls. So foreclosure, one of the things that would stop temporarily, usually that lasts few weeks to a few months, but assuming that all of your debt gets discharged and your equity is protected, it could potentially stop forever. So the chapter 13, a little bit different. Usually you're going to have a three to five year plan to deal with missed payments, but it would typically delay or stop that foreclosure. But if as always, if there's a fraud issue involved in the foreclosure proceedings, those would still potentially be able to continue even if you file bankruptcy. But very often eviction, foreclosure will stop, potentially even go away entirely during a bankruptcy proceeding.

George (23:14):

And we have some follow-up questions here from Rose. She asks if the foreclosure is based based on a fraudulent mortgage, can bankruptcy stop this?

Ben (23:23):

So it depends on what you mean by fraudulent mortgage. If you mean that someone took out a mortgage fraudulently in your name, then probably if you mean you took out a fraudulent mortgage, then probably not. Simplest question I got for you or answer I got for you,

George (23:40):

Right? I guess the question, yeah, fraudulent mortgage is a little bit vague. I would bet that she's probably, I'm guessing that you're saying the bank has duped you somehow, I would imagine. Yeah, something I'm guessing you're not confessing to fraudulently obtaining a mortgage on YouTube. On YouTube.

Ben (24:05):

Yeah. See Rose, I was really just going for the soundbite there. I think I've got some more useful information for you. So let's say that if there's something that you don't actually owe, so there's fraud, it's in your name, it's on your record, but it's not real, is not going to be your best option to get rid of that. You can still file bankruptcy, it still could potentially make the debt go away, but you're going to want to do something else like contest the validity of that mortgage, which in turn can help you with. Or if it's just a credit report issue like dragging down your score, you can dispute that being on your credit report and it'll boost up. But if that's the only thing you have going on, I don't think that bankruptcy would be your best option in that world.

George (24:50):

She's also wondering how long the stay is. Have we answered that one? How long is the stay? So when you file,

Ben (24:57):

Yeah, how long can you get stay for? It depends on the length of the bankruptcy proceedings. So usually it's like three to six months for the whole process to go through and then the stay would resume at the end of the proceedings. Or sorry, the stay would go away at the end of the proceedings. Usually after the 3 4 1 meeting, which happens somewhere between two to five months after you file. It's not going to last past the end of the bankruptcy proceedings. You'll get a piece of paper, it's gone away or not gone away, whatever survives that they could begin collection activities again on at that point. So it sounds like Rose, you're saying that they shouldn't be able to enforce the loan against you in collections on that loan because the loan was illegal or improper in some way may be the case. Generally speaking though, you're going to have to get that figured out in court.

If there's a valid claim on that debt and that claim is being enforced, you're going to have to make the argument in court. It's not just going to go away because you think or because someone has said that the loan isn't enforceable against you until a judge says it doesn't mean anything unfortunately. Alright, so we're getting dangerously close to the point of giving legal advice when neither George or I are the experts knowing specifically what to do. So my suggestion would be get a free consultation from a lawyer. There are legal aid lawyers in your area who can help answer these questions for free. Sal has resources on our side about this. I imagine solo probably does as well, right George? Yeah. So get a consultation from them and find out once and for all if this mortgage is enforceable in court, meaning can you be held liable for it?

If not, bankruptcy isn't going to be your best option. Having that lawyer or some lawyer they suggest to do something to get that proven up in court. That would be a better thing to do. It's not going to affect your credit or any other deadlines that you have. If it is yours, the same rules are going to apply that apply to anybody in bankruptcy. You will stop the foreclosure for the duration of the bankruptcy. You can protect any equity that you do own in the home under the homestead exemptions for your state and anything that's left afterwards would potentially be collectible. That's unfortunately as much specific detail as I can give you rose other than to say thanks for sharing your story. That's a pretty wild story and I hope you get some answers soon.

George (27:32):

Rose. Sounds like quite the situation. I definitely want to get a free consultation from an attorney. It can be hard. You'll probably just have to call a bunch of attorneys. You can go to these legal aid. Legal aid pretty much will always answer the phone.

Ben (27:48):

Wow, it sounds like a tight spot. Basically, Ben, what does a person have? What kind of claim even is this? I suppose you're just trying not to get sued or foreclosed on by the house. You want to avoid a deficiency judgment, right? They could foreclose on the home, repossess the home, and then sue you for the difference from what they sell the home for and what you paid for it. Definitely don't want that situation. Those can be really expensive. So you want to, it's tough in this situation because it's a defense arrangement and you probably don't have that much money. Usually defense attorneys need to be paid by the hour upfront as things are gone. So you probably don't want to do that kind of payment. So it can be a good situation for legal aid if you qualify, you have to qualify for legal aid, meaning you have to have not much income otherwise maybe there's a countersuit here.

People oftentimes, if an attorney does take a case like this, it's usually because they counterclaim that you have so you can sue someone for fraud and then get some kind of a money damage from them. At which point, that's how the attorney would get paid. So if an attorney's going to take your case, that's not a legal aid, that's probably how they're going to do it. So you have to show, you have some kind of counterclaim against somebody here, whether that's the person that sold you the home, the mortgage broker or the bank, the manufacturer of the home, somebody. So there you go, rose. Hopefully we can get this figured out for you and this will have to be worked out in court. So it's not necessarily, not necessarily whether or not somebody can collect, but it's whether or not somebody can represent themselves in court. And well said,

Ben (29:39):

That is how our legal system works unfortunately.

George (29:42):

Right? Yep. So got to advocate for yourself in court and we also, if you haven't made a solo account yet, go ahead and log into solo and check out our resources on the dashboard there as well that can help you out with this. Okay? We have another question here from Joseph in Pennsylvania. I am in chapter 13 bankruptcy in Pennsylvania, and I recently got laid off from a job that sounds like a bummer. Sorry to hear it. What are my options? And I restructure my debt or is the only option to file chapter seven. However, I have to wait for that for chapter seven for several months, and in the meantime I'm at risk of missing payments.

Ben (30:24):

Got it. Got it. So if you want to restructure your chapter 13, my best advice would be talk to the law firm or if not at the law firm, talk to a clerk at the court where you filed the chapter 13 in the first place and they can walk you through that process in terms of when you can file a chapter seven. If you want to file a chapter seven, you can do it either if it's been six years since your chapter 13 was first filed, or if you've paid off at least 70% of the unsecured debts in that chapter 13 plan in good faith. So it kind of depends on how your chapter 13 went. So hopefully that's helpful. Six years or 70% or if you want to restructure or talk to the law firm that you originally got that chapter 13 plan from or with or the clerk on what their process would be.

George (31:11):

Just zooming out on your situation. A lot of people ask us for more general advice where to go from here, et cetera. And we are pointing people to our solo steps. Really can't help ourselves with the alliterations that just line up. So we have solo steps here. So the first one is to respond to any lawsuits that you have going on. Sounds like you're doing bankruptcy. I think if you're in bankruptcy, just replace this with complete your bankruptcy situation. It sounds like maybe if you're missing these payments, you could end up getting sued somewhere in here. You want to respond to those lawsuits and file chapter seven bankruptcy, get the stay, et cetera. Get out of this position where you have debts that are so far at the end of the process that you're actually getting sued for, right? You want to avoid that. And then next up from there is settle any of your lawsuits. If you can settle any of these deaths, just go ahead and settle them. Oftentimes that can be, I mean, it kind of depends on the situation, but a lot of people find that to work better than chapter 13 bankruptcy because with some regularity, people end up in this position on chapter 13 where they miss payments

And then everything becomes due. You can really save a lot of money just by settling the debts. Depends on the situation. Sometimes Chapter 13 is great if you all your other debts, yeah, if you can afford it, settle all of your other debts. Oftentimes you can just hack off thousands of dollars by settling the debts that are available to you. And then solo, solo, step four is make a one K stash. So save away a thousand dollars just of your own money, practice saving, work out your saving muscles. And then this one, Ben, you probably agree with me, is really crucial. Step number five, automate investments in the index funds.

Ben (33:20):

Yes, the only investment advice I'm ever willing to give because it's not technically advice, but yes, it works. The only investment advice

George (33:26):

And it's the only one you need. It's the only one you need. And the crucial part here I think is automate. I oftentimes people have questions about how to actually do it. Buying stocks can be a little bit scary. Ticker sheets are still pretty intimidating online oftentimes. But the key is just to make purchases and index funds. Once I oftentimes buy S-W-T-S-X, so just like the Schwab Total Market Index fund and just put money instead and just put as much money in there as you can. If you invest around three, I mean, I don't know if the money's going to be doing this, but if you invested $3,000 a month, you'd have about a million dollars within 10 to 15 years,

Ben (34:11):

Which is incredible. Albert Einstein may or may not have said it's attributed to him that the compound interest is the eighth wonder of the world,

George (34:20):

Right? Albert Einstein's fake quotes are his best quotes. And then boost credit score to 800, get credit score up there. And then number seven, our favorite solo step is to prosper. If you're looking for a path to travel from where you're at now, Joseph, go ahead and travel on this path and these first steps here can be really replaced with bankruptcy. Just resolve your most immediate debts that

Ben (34:55):

Are pressing upon you. So if you go to investor.gov, which is a federal tool that is designed to show you how compound interest works, super hard to understand. Don't try, it'll break your brain. But the simplest model is your interest earns interest and then that interest earns interest and then it just sort of replicates forever. But something that people could actually do. So if you had no money now and you got yourself out of debt and you could afford to put even $50 a month into something like an index fund, and you earn an estimated interest rate of about 8%, which is what you tend to see, it's a pretty low average for index funds over the years, and that compounds every year. So when I think about wealth, when I think about what means to be financially stable, I think about two things. I think, do I have enough money to have and do what I want to do without worrying about it for the most part.

And then an important thing is how are my kids going to be in the future? Are they going to have enough money? And the really crazy thing that you can see with this is if you can put just $50 a month, put it in over the course of 60 too long, but put it in over the course of a standard career. So let's say like 30 years, you're going to leave your kids when you retire, you have this much when you retire, and then when they eventually retire, let's say it's 60 years down the road, the Smith doesn't quite bear out the same way that it would normally because I'm doubly compounding it, but they end up with something like 500 to $600,000 at retirement if they just don't cut it. So very little impact produces an enormous, enormous amount of money and who can't afford once they're out of debt. 20, 30, 40, 50 bucks. I was able to do this once I got out of debt but not before. Really cool thing. Play with this. It's a cool way to dream your way to a better future.

George (36:51):

Fantastic. And that's investor.gov.

Ben (36:54):

Investor.gov.

George (36:56):

That's great.

Ben (36:57):

You can be a nerd like me and George.

George (37:00):

Fantastic. Yep, yep. And we are here to help y'all, all of you folks here prosper. That is what we're here for. Let's wrap up with one last question here. Sounds good. So the bit of a big one. We got one from Jessica in Indiana. She says, I just went to court and they granted my motion to vacate default judgment.

George (37:24): Thanks. Okay. Sounds like a good start. Kind of good start. I wouldn't have known what to do without you guys, so thank you. Thank you Jessica. Glad to be here. They were trying to garnish my wages before this. My question now is, some of the paper files say that they were four days before six years statute of limitations, and the my case.com file says it was six months after the six year statute of limitations. So just reiterating that she's basically saying the statute of limitations have passed. How do I find out what the actual date is my next, how do I find out what my actual date is? Jessica, we have a calculator for that on the search statute of limitations calculator. Solo can punch things in here. The main factor is that it is based on the date that you last made a payment. That's really the crucial thing here.

So you're saying you last made a payment sometime like four years ago. This is saying that if it was four years ago, statute of limitations has not expired. Statute of limitations for credit card debt in Indiana six years. So you made a payment on January 1st. That means December 31st is the expiration date, and then it links to the law here as well. So you can go ahead and see the law and dig into it a little bit more. That's pretty much what it comes down to. It's like based on primarily the last day you made a payment.

Ben (38:59):

I didn't know you had this. I'm sending a bunch of traffic to this now. We keep having people ask this on debt collection articles. So yeah,

George (39:05):

I appreciate that. Yep, yep. We've got a really good calculator, really handy for this kind of stuff. Jessica goes on. My next question is, if it is before the six years, what do I do? So if she actually is on the hook still, what do I do? I'm still waiting for them to mail me papers with questions I'm supposed to answer and submit to the court. Is there any way I can just ask for a dismissal? Thank you all for your time and you are really doing a lot of people, lots of good help. If I didn't find you guys, I would've been expecting to pay a thousand dollars more than what I actually owe. You have no idea how grateful you. Okay, that's amazing. Hey, Jessica, Ben. Ben, what do you think?

Ben (39:51):

So I think I was up in my head for a second. I think the question was can I move to dismiss this lawsuit now? Is that right?

George (40:00):

That's right, yeah. Maybe I should have gone ahead a stab at that one.

Ben (40:04):

Yeah, go ahead.

George (40:05):

Yeah. So Jessica, the first question here is ask yourself, do I owe the debt? Right? If you agree that you owe a portion of the debt, probably the best outcome for you is going to be to settle the debt by paying some portion of the debt, right? So the collector will agree to accept a portion of the debt to resolve the entire amount. If you don't owe the debt, then certainly don't pay money that you don't owe, right? If you're being sued wrongfully, victim of identity theft, something like that, and by all means, proceed with the case, even take it to trial, contact the collector, explain that you don't owe it, get the case dismissed, et cetera. Sometimes people are pretty bothered and probably oftentimes rightfully so that they're being sued for a lot more money than they owe, right? Like you're saying, they're suing you for a thousand dollars extra.

Part of that is because their cost of collections has gone up quite a bit, right? So they, let's say you add a thousand dollars principle on the debt, on the credit card, you don't pay it. The credit card interest applies and racks up, and then they have to pay a law firm to collect on it. They're going to have to pay 20% of the debt to the law firm to collect on it. It's just a whole lot of risk. We're going to have to do a lot of work here to try to get this money back and they aren't sure if they're going to be able to get back. That said, yeah, the fees can be egregious and understandably, you don't want to pay more than the money that you got, more than the money that you took out in the actual loan. So all of that considered, oftentimes collectors are pretty happy to give you some kind of a deal that will work for you.

Or if you're being sued for $2,000, they might be willing to settle for 1800. They might be willing to settle for a thousand. Something along those lines is probably what you're looking for. If you try going the dismissal route, people sometimes mistakenly understand a dismissal to mean a win. A dismissal isn't the same thing as a win a dismissal is just getting the case removed from court. Oftentimes it's a dismissal without prejudice, so the collector can just sue you. Again, if it's without prejudice. Sometimes it's a dismissal with prejudice, in which case they won't be able to collect from you in court. They'll still be able to collect from you outside of court because they didn't lose the lawsuit. The lawsuit was just removed from court. Unless you go to trial and you win a trial and the judge says you don't owe the debt, it's not exactly a win, it's just getting the case removed from court.

So it's up to you what you want to do here. Maybe just getting the case dismissed is what you want. But a lot of people at Solo are really come in and trying to resolve any debts that they owe. They want to be debt free, they want to prosper. So I think oftentimes that's what people are looking for and that's more worth it than just getting a case dismissed and then having an unpaid debt obligation out there that people are, can call you about still at any time. Alright folks, that is pretty much the end of the show here. Ben. Thanks so much for coming on the show today.

Ben (43:36):

Yeah, see the debt. Thanks for having me. Great to be here and everybody, this has an important first step to getting out of debt and getting back to the future you deserve. So kudos for being here.

George (43:48):

Thank you all indeed. Take care.

Disclaimer: The information presented in this podcast is intended strictly for general informational purposes and should not be construed as legal, financial, or investment advice. Solo and its hosts are not licensed attorneys, financial advisors, or other certified professionals. While select guests may hold active professional licenses, their contributions are purely for educational thematic discussion. They're not delivering professional or personalized advice. Solo is not a law firm, does not offer legal representation and must not be relied upon as a substitute for professional legal counsel. It is also not engaged in debt, settlement, credit repair, or financial counseling services. SOLO provides self-directed software tools designed to support users in navigating their own legal and financial situations. Participation in this podcast does not establish an attorney-client relationship. Listeners are encouraged to consult with attorneys or licensed professionals for guidance specific to their circumstances. The opinions expressed by podcast participants are their own and do not necessarily reflect the views or official positions of Solo Suit Inc. Doing business as solo or any affiliated organizations.

SoloSettle by SoloSuit

Settle your debt
Save thousands

Make a settlement offer in minutes — no lawyers, no upfront fees.

$2.5B+

Protected

~40%

Avg. Savings

Make an Offer

4.7 from 635 reviews

How to Answer a Summons for debt collection in all 50 states

Here's a list of guides on how to respond to a debt collection lawsuit in each state:

The Ultimate 50 State Guide

Debt collector guides

Are you being contacted by a debt collector? We're making guides on how to resolve debt with each one.

Arbitration

If the thought of going to court stresses you out, you're not alone. Many Americans who are sued for credit card debt utilize a Motion to Compel Arbitration to push their case out of court and into arbitration.

Below are some resources on how to use an arbitration clause to your advantage and win a debt lawsuit.

Bankruptcy

Bankruptcy is a great way to legally resolve debt, but it's usually best to consider it as a last resort. Here are some bankruptcy guides to help you decide which debt resolution option is best for you.

Check your case status

Don't have time to go to your local courthouse to check the status of your case? We've created state guides on how to check the status of your case throughout the US, complete with online search tools and court directories.

Credit

Debt has a big impact on your credit. Below is a list of guides on how to repair and improve your credit, even while managing major debt, along with other credit-related resources.

Debt collection FAQs

Find answers to some of our the most commonly-asked questions about debt collection below.

Debt collection documents and templates

If you're dealing with debt, these documents and templates will help you respond, protect your rights, negotiate, and resolve your debts.

Debt relief

We've created a specialized guide on how to find debt relief in all 50 states, complete with steps to take to find relief, state-specific resources, and more.

Debt settlement

Debt settlement is one of the most effective ways to resolve a debt and save money. We've created state guides on debt settlement. Find out how to settle in your state with a simple click and explore other debt settlement resources below.

Eviction

Facing an eviction? The following guides will help you navigate your situation with confidence.

Federal debt collection laws

Knowing your rights makes it easier to stand up for your rights. Below, we've compiled all our articles on federal debt collection laws that protect you from unfair practices.

Legal aid

Helping people find access to justice is at the heart of Solo's misison. If you're dealing with a legal debt issue, the following guides will help you through it.

Medical debt

Having a health challenge is stressful, but dealing with medical debt on top of it is overwhelming. Here are some resources on how to manage medical debt.

Personal finance

Learn how to manage your finances and overcome crushing debt. Check out our personal finance guides below.

State debt collection laws

Debt collection laws vary by state, so we have compiled a guide to each state's debt collection laws to make it easier for you to stand up for your rights—no matter where you live.

Statute of limitations on debt

Like all debt collection laws, the statute of limitations on debt varies by state. So, we wrote guides on each state's statutes and more.

Stop collection calls

Do you keep getting calls from an unknown number, only to realize that it's a debt collector on the other line? If you've been called by any of the following numbers, chances are you have collectors coming after you, and we'll tell you how to stop them.

Wage garnishment

Forgot to respond to your debt lawsuit? The judge may have ordered a default judgment against you, and with a default judgment, debt collectors can garnish your wages. Here are our guides on how to stop wage garnishment in your state, plus other wage garnishment resources.

The Debt Hotline

Hosted by Team Solo, The Debt Hotline breaks down debt and personal finance topics with help from attorneys, financial experts, and industry pros. We respond to real questions to help you navigate debt with knowledge and courage.