Can I File Chapter 13 Bankruptcy if I’m Unemployed?
Chapter 7 and Chapter 13 bankruptcies offer different benefits. Chapter 7 is generally reserved for low-income debtors who have significant unsecured debt, such as credit card debt, medical debt, personal loans, and old taxes. Through Chapter 7, debtors are able to “discharge” or wipe out certain types of debts. Meanwhile, Chapter 13 is a debt reorganization bankruptcy where debtors get to keep their property while entering into a 3 to a 5-year repayment plan.
Chapter 13 allows debtors to catch up on mortgage arrears and save their homes from foreclosure, which is a big deal if there’s a lot of equity in the home. It allows them to keep their cars and catch up on priority debts like child support and spousal support. Each debtor’s situation is different and for those who want to keep their property, they may be inclined to file Chapter 13, but if they’re unemployed, they may not qualify under this chapter.
Impact of Unemployment on Chapter 13
There is nothing written in the bankruptcy laws that says you can’t file Chapter 7 or Chapter 13 if you’re unemployed. The issue is qualifying for Chapter 13 while you’re unemployed. Chapter 13 involves a monthly repayment plan where a debtor pays all or just a portion of their debt off depending on their available disposable income after paying their bills.
If you’re unemployed and you don’t have another regular source of income, you may have difficulty qualifying for Chapter 13. However, being unemployed in itself doesn’t disqualify you. Do you have another source of verifiable income that can help you afford your plan?
Other possible income sources to help you qualify:
- Rental income
- Social Security Disability benefits
- Social Security Retirement benefits
- Child support
- Spousal support
- Unemployment benefits
- Workers’ compensation benefits
If you can prove to the bankruptcy court that you have a regular source of income, it’s likely you’ll be approved for Chapter 13, but another option to consider is getting a new job, then filing Chapter 13 once you qualify. To fully explore your options for bankruptcy relief, we invite you to contact Albaugh Law Firm.