Bankruptcy and unemployment are often topics that come up together. If you are unfortunate enough to be unemployed, you may be faced with difficult financial decisions. You may be unable to pay bills and not have enough money to make ends meet. Bankruptcy may be a solution for you.
If you have questions about your specific situation, Steadman Law Firm can help. Call us today at 843-442-8670.
Can I File Bankruptcy If I Am Unemployed?
Yes. You can file bankruptcy whether or not you have employment income. For Chapter 7 bankruptcy, you will still have to take the means test to determine if you qualify for this type of liquidation bankruptcy. The lower your income, the easier it will be to pass the means test. Thus, if you are unemployed, you may have a greater chance of qualifying for Chapter 7. However, if you don’t qualify for Chapter 7, you may still be able to file bankruptcy through Chapter 13 or another form that is right for you.
Unemployment Can Help You Pass the Chapter 7 Means Test
The means test uses an average of your monthly income over a six-month period preceding your bankruptcy. It compares this number with the median income for households of a similar size in your state. If your income is below median, then you pass the means test.
If you are unemployed, then you will have little to no income to compare to the median amount for households your size. If you are married, and your spouse has a job, then your unemployment will reduce your combined household income and can help you qualify for Chapter 7.
Unemployment May Make It Harder to Qualify for Chapter 13
Chapter 13 bankruptcy, also known as reorganization bankruptcy, allows you to develop a three- to five-year payment plan to repay the majority of your debts. If you do not have reliable income from a job, you may not be able to repay any of your debts; thus, you may not qualify for Chapter 13.
If you have unpaid child support, alimony, or taxes that you hope to roll into a payment plan, being unemployed may be a complication to your qualifying for Chapter 13. Similarly, if you are hoping to keep a car or house by including those payments in a bankruptcy payment plan, then you may want to file Chapter 13. Unemployment can make it difficult to prove to the court that you can repay your creditors.
Do Unemployment Benefits Count as Income?
The court will count your unemployment benefits as income. However, most unemployment benefits are so limited that you will still fall below the median income and qualify for Chapter 7. This may not be true if you have other income from rental property, retirement benefits, or other sources.
Social Security benefits are not generally included as income in the means test; however, some bankruptcy courts count unemployment compensation as a type of social security since it is funded similarly.
Contact a Skilled Bankruptcy Lawyer for More Information
Bankruptcy and unemployment issues can be complex. Learn more from the knowledgeable bankruptcy attorneys at Steadman Law Firm can help. Call us today at 843-442-8670.