In light of the coronavirus pandemic (COVID-19), this article is very timely.
After President Donald Trump declared a national emergency in mid-March,
movie theatres shut down, schools switched to online learning, concerts
and events were canceled, and “non-essential” businesses were
ordered to close their doors. The result? Millions of Americans lost their
jobs and even as of this writing, no one knows for sure what the future holds.
If you lost your job because of the pandemic, or if you are a business
owner whose business was crushed by COVID-19, and now you’re losing
everything, and possibly your personal home, you may be wondering if you can file
bankruptcy if you’re unemployed or have no source of income, and that’s
a reasonable question indeed. Read on as we shed light on this topic.
Unemployment as an Advantage
You don’t need to have a job to file
Chapter 7 bankruptcy. In fact, being unemployed or underemployed can actually work
to your advantage. Generally speaking, when a debtor is unemployed, it
can help them qualify for Chapter 7 since debtors have to pass the “bankruptcy
means test,” to qualify. Since Chapter 7 is for low-income filers,
being unemployed helps a debtor pass the means test.
The Chapter 7 bankruptcy means test compares the debtor’s average
monthly income for the six months before filing bankruptcy against the
median income for a household of the same size in the debtor’s state,
which in this case would be Florida. If a debtor’s income is below
Florida’s median income for their household size, the debtor automatically
qualifies and passes the means test without having to complete the rest
of the form.
“But what if I am receiving unemployment?” is a question a
lot of our clients ask us. If you’re not married and you don’t
have any dependents, your monthly unemployment benefits are almost guaranteed
to be below the income threshold for a single person. If you’re
married and your spouse is working, your unemployment could help you qualify
for Chapter 7 by reducing your combined household income.
If you’re unemployed or underemployed and considering seeking bankruptcy relief,
contact Albaugh Law Firm to learn more!