Yes, you can file Chapter 7 bankruptcy or Chapter 13 bankruptcy even if you are unemployed. You don’t have to be employed to file for bankruptcy. Many people will need to file after losing their job.
The type of bankruptcy you choose depends on how much debt you have, what options you have to repay it, and how optimistic your view is about finding a job.
Both options should be considered in their entirety.
Chapter 7 bankruptcy can be used to discharge some or all of your debts. Credit card debt, medical bills and other traditional debt can be forgiven. You cannot get rid of student loans, child support, or spousal support. To get a Chapter 7, you must pass a “means check”.
Chapter 13 bankruptcy can be used to discharge certain debts, but it will require a repayment plan. To pay off debts or surrender property to bankruptcy trustees, you must have sufficient income. This may not be the best choice if you don’t have any income.
Unemployed can file for Chapter 7 bankruptcy
You may need to speak to a bankruptcy attorney if you have any questions about Chapter 7 requirements.
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You must prove your eligibility by:
- It is a sign that your monthly income is below the state’s median. The size of your family will affect the amount. The bankruptcy court may deny your request if you have made too much in the six months prior to filing. This could mean that your six-month income will appear lower if you wait.
- You can qualify through the Chapter 7 Means Test in your state. This calculation compares your disposable income, your debt, your family size, and your bills to the state’s median income. It is easy to show that you cannot pay your bills or debt if you are not working.
- Chapter 7 approval will allow you to have your debts forgiven immediately and stop harassing you by debt collectors. However, non-dischargeable obligations still have to be paid. You are also exempted from wage garnishment on your future paychecks in order to repay the debt.
If you are unemployed, file for Chapter 13 bankruptcy
Chapter 13 bankruptcy will require a repayment plan to pay back a portion of your debt. This gives you more time to repay your debt and allow you to keep secured debts like your car loan or home mortgage. It can be hard to prove that you have the funds to pay these monthly payments if your job is not available.
Although unemployment benefits may provide some income each month, the majority of it is used to pay rent or mortgages and bills. Let’s say you have enough income from unemployment or rental to pay your bills now and the repayment plan. Chapter 13 may be an option for you, but it is very rare.
Bankruptcy Filing: What to Do After You Lose Your Job. After losing your job, you may feel anxious and overwhelmed by the increase in debt. An experienced bankruptcy attorney will help you determine the best time to file bankruptcy. These questions should be considered before you speak with an attorney or file a lawsuit.
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What was the date I lost my job?
- What is the longest time I can predict that I will remain unemployed?
- Did I make enough money to last me for a few more months?
- What benefits can I expect from unemployment insurance and unemployment compensation?
- Is a new job promising?
- Are my skills in demand?
- Do I have the chance to receive Social Security benefits in the near future?
- What if I get injured or become ill?
- What happens to my medical debt if I’m not working?
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If you have just been in a high-earning job, you should wait before you file. Otherwise, you might fail the Means Test. If you require more medical care, you might want to delay filing. The bankruptcy discharge applies only to your current debt. Any future major medical debt would not be discharged. You should wait until you have completed your medical treatment or are finished with your care to see the full picture of your medical debt.