Difficult and seemingly unsolvable financial situations can arise from long periods of unemployment. In some cases, lack of income can fuel existing debts, whether it be medical bills, credit cards or student loans. Even though a person is unemployed, he or she can still file for bankruptcy. However, unemployment does affect how debtors can benefit from either Chapter 7 or Chapter 13 bankruptcy.
Being unemployed can help when filing for Chapter 7 bankruptcy, as it is less likely the person will be required to take the means test. The means test, which is required to qualify for Chapter 7 bankruptcy, compares a debtor’s household income to state median. Additionally, Chapter 7 bankruptcy could discharge some of the unsecured debts weighing down unemployed individuals, such as some types of credit card debt and medical bills.
Chapter 13 bankruptcy can be more difficult for unemployed individuals, as they may have greater difficulty affording repayment plans. Debtors are required to set up monthly repayment plans with the case trustee, which may be difficult if a person is not receiving income. However, some who are unemployed still receive state or federal benefits that can be put towards a Chapter 13 repayment plan. Depending on the person’s other finances and living situation, this may not be the best option.
Why Discussing Options with A Bankruptcy Attorney is Important
People looking to file for bankruptcy face different financial situations, and this means options can vary considerably. Experienced bankruptcy attorneys have seen almost everything when it comes to solving difficult financial situations. Unemployment qualifies as a difficult financial situation, and people without jobs still have options to file for bankruptcy.