If you’re unemployed and having a hard time paying your monthly bills,
you may be considering
bankruptcy and reasonably so. But you may also be wondering if you can file for bankruptcy
when you’re unemployed. Will unemployment be a problem? It depends
on the type of bankruptcy you’re interested in.
Generally, if you file
Chapter 7 bankruptcy, the fact that you’re unemployed will work in your favor because
it will help you qualify for Chapter 7. If it’s
Chapter 13 you’re interested in, your unemployment could help you pay less
to your unsecured creditors, however, if you don’t have enough income
to pay monthly payments on a Chapter 13 repayment plan, you may not qualify
for a Chapter 13.
Filing a Chapter 7 When You’re Unemployed
Not everyone can file Chapter 7 bankruptcy. If someone earns too much money,
they may not qualify for Chapter 7; therefore, unemployment can definitely
help you qualify for bankruptcy under this Chapter. To qualify for Chapter
7 bankruptcy, your disposable income would have to be low enough to pass
the “bankruptcy means test.”
The bankruptcy means test compares a debtor’s income in the past
six months to the average income for a household of their size in the
state. So, when you’re unemployed, it can be much easier to pass
the means test than if you had a well-paying job.
It Can Be Harder to Qualify for Chapter 13
People often file a Chapter 13 because they earn too much to qualify for
a Chapter 7 because they want to keep their vehicles, they need to catch
up on recent taxes or child support, or because they want to save their
foreclosure. Since Chapter 13 involves a 3 to a 5-year repayment plan, unemployment
can disqualify someone from filing a Chapter 13 because they can’t
afford the monthly payments.
If you have other sources of income, such as Social Security retirement
or disability benefits, unemployment benefits, workers’ compensation,
rental or retirement income, you may have enough income to qualify for
a Chapter 13. However, if you are not able to keep up with the monthly
payments, your Chapter 13 case can be dismissed.
To explore your bankruptcy options and how they apply to your employment status,
contact Albaugh Law Firm today!