Bankruptcy when unemployed

unemployment and bankruptcy

Bankruptcy and Unemployment 

For some reason that I have not been able to determine there is a rumor floating around that you need to employed to file for bankruptcy protection.  There is no requirement under the Bankruptcy Code to be employed to get protection of the bankruptcy court.  So rest assured that you can still file for bankruptcy even when you are unemployed. However your employment status may affect the type of bankruptcy case you file as discussed below.

Your employment status could affect if your bankruptcy is successful or not. In a Chapter 13 bankruptcy case for example you must have “regular income” to get your case to be approved because there’s the chance that your income cannot provide you with money to make payments on your repayment plan. Since Chapter 13 cases are all about repaying your creditors the inability to pay defeats the purpose of that chapter of the bankruptcy code.

In a Chapter 7 case being unemployed usually makes it easier to file for a Chapter 7 bankruptcy. Since the introduction of the Means Test in 2005 your ability to file for bankruptcy is determined by your income for the six months prior to the filing of your case.  So you can see if you have limited or no income for the six months before you file for bankruptcy protection the base numbers used to determine your eligibility to file a particular case may be limited or even non-existent thus allowing you to qualify for a Chapter 7 case.

Again a word of warning when dealing with these issues it very important to consult with an experienced bankruptcy attorney.  Most attorney that are members of NACBA offer free or very low cost consultations so I searching for someone like that in your are is important so you receive the most informed advice on your particular situation.  Of course if you are reading this in Utah come in and visit with us we would be happy to look at your situation and see if bankruptcy is right for you.

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