You can file for bankruptcy when you are unemployed, it is especially for people who lost their job and are looking for debt relief. Filing for chapter 7 and chapter 13 can help you get debt relief even if you are unemployed. Which chapter to choose for you all depends on your total debt, your income, and how you are going to repay if you file for chapter 13.
When filing for Chapter 7 bankruptcy, you need to pass the means test, and if you qualify you can get all or some of the debts discharged. Debts like medical bills, and credit card bills are easily dischargeable but debts like student loans, alimony, or child support are not dischargeable here.
If you are unemployed chapter 13 bankruptcy is not a good choice for you because it sets a repayment plan to repay the rest of the debt and you have to have a steady income to apply.
Filing for chapter 7 bankruptcy when unemployed-
To qualify for chapter 7 you need to pass the means test, here it sees your state’s average income is higher or lower than your disposable income. If your disposable income is lower than the state’s average, you qualify for chapter 7. It also sees your total debt, family size, and the last 6 months of income that you received. If you are unemployed then you are qualified for chapter 7.
When you apply for chapter 7 bankruptcy you will get immediate relief from all the dischargeable debts and all collection efforts will be stopped. It will also protect you from wage garnishment from a future paycheck but still, you have to pay the non-dischargeable debts.
Filing for chapter 13 bankruptcy when unemployed-
It is very rare to apply for chapter 13 if you are unemployed because you have to have a monthly steady income to complete a repayment plan. If you have some unemployed money, you can only apply for chapter 13 bankruptcy. Otherwise, chapter 13 is a great chapter if you want to keep all your assets as well as some of the secured debts like home loans or car loans.
How soon should you file after you are unemployed?
It is very frustrating to lose your job and see your debts being increased every day but it is advisable to seek help from a legal counsel that can guide you the best into your secured and happy financial future.
It is better to wait to file if you had a high-earning position before getting unemployed because then you won’t be able to pass the chapter 7 means test. If any medical tests are going on or the bill will increase then you should wait till all the medical care is done because the case will only discharge the medical debt that was done before filing and not during or after.