Can I File for Bankruptcy if I Am Currently Unemployed?

When you’re considering filing bankruptcy, it’s natural to have a lot of questions about requirements and restrictions. One of the most common questions people have is about how their employment status may affect their filing. Ultimately, your ability to file for bankruptcy is not contingent on whether or not you have steady employment, but it may have an effect on how your bankruptcy case plays out.

woman at the unemployment officeBankruptcy cases are notoriously complicated and difficult to manage without legal assistance. The federal government even explicitly recommends seeking qualified legal guidance before filing for bankruptcy due to the serious financial implications that come with it. If you’re unemployed and considering bankruptcy, be sure to speak with a seasoned Florida bankruptcy attorney before making any final decisions.

 

Employment and Income in Chapter 7 Bankruptcy

Employment matters in bankruptcy cases only to the extent that your level of income matters. Whether you’re fully employed, partially employed, self-employed, or unemployed is far less relevant to the outcome of your case than the amount of money you actually earn. It’s also far more important in a Chapter 7 bankruptcy compared to a Chapter 13, due to the way debt forgiveness works in this case.

Chapter 7 Means Test

In order to be eligible for Chapter 7 bankruptcy, your income from the last 6 months must be less than the median for your state. For example, if the median income in Florida over 6 months is $50,000 and you earned $60,000 in that same time, you may not be able to pass the means test — although certain income deductions and exemptions may apply. Earn less than the median, and you pass more or less automatically. 

This relates to your employment only in that being unemployed doesn’t erase the last 6 months of income you’ve earned. Usually, if you are considering filing bankruptcy and are newly unemployed, it can be hugely beneficial to hold off on filing for a few months in order to reduce the amount of income you need to compare to the 6 months median.

If you’re unemployed but have new work lined up, it can also affect your ability to file Chapter 7, even if you pass the means test. The trustee for your case may be able to discover that a new job you’re planning on starting has a significant salary and can suggest a switch to Chapter 13 instead, which generally allows fewer debts to be totally wiped out.

Employment and Income in Chapter 13 Bankruptcy

Income and your employment status have a bigger role in a Chapter 7 case because of the means test. Most people who file bankruptcy prefer Chapter 7 because it offers more opportunities to fully discharge certain debts. In a Chapter 13 case, a payment plan is created, and you’re expected to make steady payments for a set period of time.

In order for a court to determine how much you should be paying each month, you’ll need some form of monthly income to compare it to. For this reason, if you’re unemployed and without any other source of funds or income, you will likely only be able to file a Chapter 7 bankruptcy anyway. Chapter 13 bankruptcy requires some form of income from a verifiable source, otherwise, there is no good way for the court to structure your repayment plan.

This is usually not a problem for an unemployed person looking to file bankruptcy, since they’d likely prefer having their debt wiped out completely. Even with unemployment income from the government, an unemployed person usually doesn’t have enough disposable income to qualify for a Chapter 13 filing. There have been some cases in the past where an unemployed person has multiple sources of income, like rental property, social security benefits, retirement income, or disability benefits, and is unable to pass the means test due to the net value of this income. In these cases, Chapter 13 may be the only option, but speaking with an experienced Florida bankruptcy attorney to verify your options would be a good first move.

Get Legal Help With Your Florida Bankruptcy Case

When dealing with the financial stresses of bankruptcy while unemployed, it can feel like the world is against you and no one is on your side. In these cases, getting help from a seasoned local bankruptcy attorney can bring you peace of mind and a level of confidence in your ability to get through this difficult time and come out better on the other side. 

Hoskins, Turco, Lloyd & Lloyd have been serving Florida residents to deal with their bankruptcy cases for decades and want to help you too. No matter your current level of employment, bankruptcy is a serious decision, and getting advice from a seasoned attorney is a smart idea. Give us a call at 866-460-1990 or contact us online to get started on a free consultation as soon as possible.

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