Can I File Bankruptcy if I’m Unemployed?

Bankruptcy, Bankruptcy Advice, Chapter 13, Chapter 7 Bankruptcy0 comments

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 financial stability.

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 disposable income.

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.

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