If you’ve recently lost your job and the bills are piling up, you might begin to wonder, “Can you file bankruptcy while unemployed?” The good news is you’re allowed to file for bankruptcy while you’re unemployed. However, before doing so, it’s important to consider whether it’s the best way out of your current financial situation. If it is, filing for bankruptcy while unemployed brings unique concerns that make it important to plan the timing of when you file.
Can You File Bankruptcy While Unemployed?
Filing for bankruptcy has nothing to do with your employment status. You can file for bankruptcy regardless of whether you have a job. A wide variety of circumstances can lead unemployed individuals to consider bankruptcy. The death of a spouse whom you depended on for income, a recent job loss, or relying on income from sources like investments or rental properties are just a few of the common situations bankruptcy attorneys see when helping unemployed clients navigate the bankruptcy filing process.
Examining Your Bankruptcy Options
If you’re unemployed and considering bankruptcy, it’s important to first speak with a bankruptcy lawyer about your options. If bankruptcy is the best path forward in your situation, you may have to choose between whether you file for Chapter 7 or Chapter 13 bankruptcy.
Chapter 7 and Unemployment
Chapter 7 bankruptcy allows the discharge of most unsecured debt. Examples of this include credit card debt, personal loans, and medical debt. Most unemployed individuals qualify for Chapter 7. Chapter 7 can clear significant amounts of debt, but you have to be willing to give up assets of value that are not exempt or protected by law. Chapter 7 also requires that you pass a means test. If you have alternative forms of income, you might not qualify to file Chapter 7 bankruptcy.
Chapter 13 and Unemployment
Chapter 13 bankruptcy also allows for the discharge of unsecured debt. However, it also involves setting up a repayment plan for secured debt, like your home mortgage and auto loan. You’re able to maintain possession of those assets, but you must make the monthly payments required in your Chapter 13 payment plan. Whether Chapter 13 is right for you depends on why you’re unemployed and how long you expect to be without a job. This option is typically advisable only if you have alternative forms of income or expect to find employment soon.
Thinking about filing for bankruptcy while unemployed? I’m attorney Lewis Roberts, PA, an experienced Florida bankruptcy attorney. Give me a call at (407) 749-0080 and schedule a free consultation to discuss how I can help.
Understanding the Chapter 7 Means Test
The Chapter 7 means test is often the determining factor in which type of bankruptcy you file for. If you don’t pass it, Chapter 13 is your only option. However, that doesn’t mean you should automatically opt for Chapter 7 if you do pass the means test. If you can commit to a monthly payment plan and have assets you’d like to protect, that are not exempt by law, it’s still worth considering Chapter 13. However, for unemployed individuals, that means either having an alternative income source or planning to seek employment in the near future.
Factors like employment earnings from the past six months and unemployment benefits that will end soon can throw off the results of your means test.
The Chapter 7 means test is designed to reduce the potential for abuse of the bankruptcy system. You must report your income, assets, debt, expenses, and household size. The test weighs the amount of your debt against your income over the past six months. Passing the test requires showing that your income is low enough that even partial debt repayment is not feasible.
Do Unemployment Benefits Count for the Chapter 7 Means Test?
Nearly all types of income are counted on the Chapter 7 means test, not just income from a job. Even if you’re unemployed, most other forms of income are counted toward your overall monthly income amount, including unemployment benefits. The following benefits are included as income on the means test:
- Child support
- Alimony
- Pension
- Settlement income
- Some veteran benefits
- Unemployment benefits.
Only a few types of income aren’t counted on the means test. These are primarily Social Security income and certain types of veteran disability benefits.
Can You File Chapter 13 Bankruptcy Without a Job?
Chapter 13 doesn’t require you to be employed before filing. However, opting for Chapter 13 means committing to a monthly debt repayment payment plan that typically lasts three to five years, and the first payment is due 30 days after filing. If you don’t have alternative forms of income, you should probably not file Chapter 13 unless you’re confident that you’ll soon find employment. The purpose of filing bankruptcy is to regain control of your finances. It’s a mistake to file Chapter 13 if you know you won’t be able to afford the monthly payments your repayment plan will require.
Timing Matters When Filing Bankruptcy While Unemployed
If you’ve recently become unemployed, timing matters when filing for bankruptcy. Both Chapter 7 and Chapter 13 typically use a six-month look-back period when investigating the current state of your finances. If it has been less than six months since you lost your job, your income will give a false impression of your current finances by including your job earnings. Similarly, if you receive unemployment benefits and they run out in the near future, this can give a false impression of the income you can depend on receiving in the coming months or years. That is why it is important to consult with an experienced bankruptcy attorney.
Speak With a Florida Bankruptcy Attorney Today
Every individual has a unique employment situation. It’s best to consult with a bankruptcy attorney about past and future earnings, in the form of both employment income and unemployment benefits. A lawyer can advise you on how and when to file so that your filing accurately reflects your current and expected future income. With proper planning, filing for bankruptcy while unemployed can help get your finances back on track.
Unemployment puts a strain on your finances, but you have options. I’m attorney Lewis Roberts, PA, and I run a Florida bankruptcy law firm. Schedule a free consultation by calling (407) 749-0080 today.
Attorney Lewis Roberts
The weight of debts that one cannot pay carries financial stress into every waking moment. It is time for this to end. Lewis Roberts, PA, offers solutions to relieve these worries. With over 20 years of experience in helping individuals overcome the burden of debt, bankruptcy attorney Lewis Roberts presents a range of options tailored to each unique situation. Clients can trust his advice on any matter related to debts, as he identifies appropriate options and explains the paths to debt relief clearly and carefully. This ensures that clients make the best decisions for their future. [ Attorney Bio ]
