Filing Bankruptcy When Unemployed

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Filing Bankruptcy When Unemployed

Filing for bankruptcy does not specifically mention the requirement of an income source. But, directly or indirectly there is a significant impact of employment on eligibility for Chapter 7 and Chapter 13. If you have lost a high salary job recently, you might end up qualifying for Chapter 7 and at the same time, if you just lost the job and are unemployed while filing bankruptcy, you won’t qualify for Chapter 13. It’s really tricky when it comes to employment and bankruptcy. To know more such interesting stuff about bankruptcy, log on to Recovery Law Group.

What are the employment factors affecting bankruptcy?

The past, present, and future all three aspects are touched while looking into the employment status while evaluating bankruptcy. Some of the key aspects relating to employment that needs to be assessed can be listed as follows-
• The duration or tenure of employment
• The pay scale difference between the previous employment and the current employment
• Possibilities of availing job in the near future if unemployed
• Other sources of income
The four factors listed above are the most important discussed aspect that can determine whether you will have to file Chapter 7 or Chapter 13. The employment and income sources become extremely important for Chapter 13 as you need some disposable consistent income in order to qualify.

How does employment impact Chapter 7?

Chapter 7 is basically the disposal of all nonexempt assets to settle the debts. Its one of the fastest ways to get over debt, release maximum unsecured debt, and have a fresh start with finances once again. It is quick too. Being unemployed actually helps you to qualify for Chapter 7. A means test is the basic eligibility test for the filer to be eligible for Chapter 7. Means test basically is the comparison of your income with the median state or federal income. If your income minus the standard expenditures are less than the average median of state or federal (depends on the state in which bankruptcy is being filed), you qualify for Chapter 7 bankruptcy.

The average gross income earned by each and every family member over a period of recent six months is considered for means test eligibility. If the income is above the state/federal median, some standard deductions are reduced to account for daily expenses based on a number of family members. If the income then falls short of the state or federal median, you qualify, or you will have to consider other alternatives. This also means if you have just become unemployed, the average income over 6 months might just pull you over the median income and result in ineligibility to file under Chapter 7. The best practice then would be to wait until the average falls below the median. Similarly, if you get a new job during the bankruptcy case is in progress, the dynamics can change based on circumstances.

How does employment impact Chapter 13?

With respect to Chapter 13, the case is completely the opposite. No income means no eligibility for Chapter 13. The stability of the job, the tenure of the employment, and the disposable income play an important factor in determining eligibility for Chapter 13. If you are unemployed and do not possess any other strong and consistent source of income, it is highly unlikely to qualify for Chapter 13. If you are unemployed but possess some additional sources of income like rent/royalty, social security benefits, nonemployment compensation, pension, etc., there is still a possibility of being eligible to file under Chapter 13. Even a sole proprietor business income could qualify as a source of income however, the eligibility ultimately shall be at the court’s discretion on the case to case basis.
There are many ways to be eligible for Chapter 7 and Chapter 13. You need the help of the right attorney. Call +1 888-297-6203 right now for the best solution for your eligibility concerns.