If you lost your job (for any reason), there’s a good chance that
you’ve had trouble paying your bills. If you’re like most
people and you didn’t have a sizeable savings to fall back on, the
job loss could have led to unpaid utilities, unpaid rent or late mortgage
payments, past-due credit card bills and late payments on your auto loan.
It doesn’t take long for a lack of income to impact our financial
health. In fact, most people can’t survive more than a month without
a regular income. So, it’s understandable how losing one’s
job can lead to financial ruin, especially if they have difficulty replacing
their income in a timely fashion.
Even hard-to-control health factors; for example, being in an accident,
suffering from a debilitating medical condition, such as Lupus or multiple
sclerosis, or a disease like cancer can lead to the joss of a job and
Does Unemployment Bar Me from Bankruptcy?
No, you do not need a job to file for
bankruptcy relief. In fact, unemployment can work in your favor if you want to file
Chapter 7 bankruptcy. If you wish to file a
Chapter 13 bankruptcy, unemployment may allow you to pay your creditors less, providing
you still have a source of household income.
In order to file Chapter 7 bankruptcy, you must meet the “bankruptcy
means test,” which means your income must be low enough to meet
the income requirement. If you’re unemployed, and you have very
little income, it’s going to be much easier to qualify than if you
were employed in a high-paying job.
To determine if you pass the means test, your income over the previous
six months will be compared to the median income for a household of your
size in Pennsylvania. If your income falls below the threshold, you automatically
pass the means test and your income qualifies for a Chapter 7.
It’s Harder to Qualify for Chapter 13
If you prefer to file a Chapter 13 because you wish to save your home from
foreclosure or keep your automobiles, unemployment will make it harder
to qualify. This is because you need enough income to enter into a Chapter
13 repayment plan, which lasts 3 to 5 years depending on your debts and
With a Chapter 13, you pay back a portion of your debts over the life of
the plan. This can be difficult to do if you lack the funds to keep these
payment arrangements. However, if you have income from Social Security
retirement or disability benefits, workers’ compensation, retirement
income or a pension, you may have enough income to qualify for a Chapter 13.
To find out if a Chapter 7 or Chapter 13 bankruptcy is better for you,
contact our firm to meet with a
Harrisburg bankruptcy attorney for free.