Bankruptcy And Unemployment Benefits
While unemployment benefits do count as income, it is unlikely that your unemployment checks are high enough to disqualify you from filing bankruptcy. If you choose to file Chapter 7 or Chapter 13, your unemployment benefits cannot be taken away in the bankruptcy process.
One factor that does need to be considered if you are getting unemployment benefits is when they will run out. We will act quickly to make certain you get the positive impact of filing bankruptcy as soon as possible.
Why Doesnt Everyone File Bankruptcy On Their Debts
Bankruptcy is a process and a right that you need to qualify for. A bankruptcy trustee will look at the paperwork filed to make sure that you qualify for the bankruptcy. Although there is no time limit after you are unemployed in order to file a bankruptcy, there are qualifications like income , asset limits . If you are collecting unemployment checks, you may still be able to file a bankruptcy because unemployment checks will not likely be above the allowable income threshold of bankruptcy court.
Check your options with a Chapter 7 or Chapter 13 bankruptcy filing if you find yourself in an unemployed situation and are unable to pay your bills. It may be one of the best strategies for you to keep the cash in hand instead of losing it all to your creditors. You can contact Bankruptcy Law Professionals at to schedule a free consultation.
Unemployment How Soon Can You File Bankruptcy After You Lose Your Job
An unexpected event such as unemployment is never easy to manage if you dont have financial reserves to depend on. Even if you do have financial reserves, it is difficult to plan a future around an unemployed situation. Unemployment can occur unexpectedly through a layoff or by getting fired from your job. When this happens and financial resources are limited, you need to know your best course of action in the situation you are faced with. If there are bills that cannot be paid after a prolonged period of unemployment, you can put yourself in a stressful predicament with an unpredictable outcome. One way to take control of the situation is by filing bankruptcy to limit your exposure to creditors who can deplete your financial assets.
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Will Unemployment Affect My Bankruptcy Case
Unemployment most likely won’t make a difference in whether or not you can file bankruptcy.
Filing Chapter 7 bankruptcy can be particularly helpful if you’re unemployed, because it’s set up for people who have few assets. If you’re unemployed, that could easily be you because you don’t have any disposable income with which to pay back your debts.
In the case of Chapter 13, bankruptcy while unemployed could get a little trickier. Chapter 13 allows you to set up a payment plan for your debts but that can be difficult if you have no disposable income. Still, depending on your situation even a Chapter 13 is possible when unemployed.
Are you receiving unemployment benefits? In most states including Missouri and Kansas your unemployment benefits are exempt from bankruptcy, meaning you can file for bankruptcy and still not even lose the benefits you need.
If you’re considering filing bankrutpcy but are unemployed or underemployed, we can help. Castle Law Office has been handling bankruptcies for Kansas City clients from more than 14 years. If you need the fresh start bankruptcy can provide, call us today at 816-842-6200 to speak with an attorney. Or and schedule your free consultation.
Negotiate With Your Creditors
If you cant meet any of your financial obligations, you need to contact your creditors. Explain your employment situation, and see if you can negotiate reduced interest charges or a deferred payment schedule.
Some creditors may work with you and lower your payments. Some may not.
You may have some success with your mortgage holder. Banks and other mortgage lenders are under more pressure to agree to mortgage modification requests.
Talk to your loan servicer about lowering your interest and/or principal payments or granting a loan forbearance. That may enable you to make partial payments or even none at all for a set period of time. Your auto loan lender also may be willing to agree to a forbearance plan.
If you have a federally backed student loan, the government has many payment options available during times of economic duress, including unemployment. Contact your loan servicer for details or check with the U.S. Department of Education for guidelines.
You may be able to enroll in a debt management program if you still have sufficient income to make your monthly debt payments. Speak with a to see if you qualify.
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Having A Job Won’t Stop You From Filing For Bankruptcy
By Carron Nicks
Yes, employed people can file for bankruptcy, and often do. Your employment income will play a role in determining whether you can file Chapter 7 bankruptcy and wipe out qualifying debt in four to six months, or whether you’ll make monthly payments to your creditors for three to five years through a Chapter 13 repayment plan.
Employment Status When Filing For Bankruptcy
Chapter 7 and Chapter 13 each offer unique benefits to filers. The first allows filers to cancel debt quickly while the second lets people keep property in exchange for paying into a payment plan.
Because each chapter has different qualification standards, how your unemployment will affect your bankruptcy will depend on some of the following factors:
- how long you’ve been unemployed
- how much you made at your prior place of employment
- whether you’ll start another job soon
- whether you have another source of income, and
- whether you plan to file for Chapter 7 or Chapter 13 bankruptcy.
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You Don’t Need A Job Or Any Income To File Bankruptcy
Your ability to file a bankruptcy case is not dependent on your employment status. Being unemployed is a common cause when it comes to reasons to file bankruptcy, and it is possible to file bankruptcy with no money. Being unemployed certainly qualifies as a situation where you might need debt relief. After all, itâs likely causing an inability to keep up with monthly payments on your credit cards or medical bills. If youâre unemployed, consider the factors and information discussed below when making your decision. If youâre unsure, you can always seek the advice of legal aid, a bankruptcy attorney, or the resources and information about the decision to file available in Upsolveâs Learning Center.
Filing For Chapter 7 Bankruptcy While Unemployed
Chapter 7 is designed to help low-income or unemployed debtors who do not have substantial assets. Under Chapter 7, your creditors will only receive repayment if you have non-exempt assets that your bankruptcy trustee can liquidate in order to pay them. Although the trustees job is to make sure creditors are repaid to the extent possible, people who file for Chapter 7 usually do not have non-exempt assets, and creditors are not repaid.
In order to file under Chapter 7, you must pass the means test. The first step of the means test is to look at whether your income is below the median, and if it is you pass the means test and do not have to take further steps. In most states, even if you receive unemployment benefits, they will not put you over the median income for your state.
Bankruptcy courts in different jurisdictions vary on whether your unemployment compensation counts as income for purposes of the means test, based on whether or not they consider it a benefit arising out of the Social Security Act. Some courts do not consider these benefits to be Social Security benefits, and in those courts, your unemployment benefits must be included in the means test calculation.
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The Means Test And Your Bankruptcy
Everyone who files for bankruptcy protection must undergo what is called the means test. This test examines how much money you have versus your debts. In some states, unemployment benefits will count as income in the means test.
The means test will play a large part in determining whether you file for Chapter 7 or Chapter 13 bankruptcy. It will look at:
- How long youve been unemployed
- What you were making before losing your job
- Your prospects for finding a new job
- Other sources of income
Can I Qualify For Bankruptcy If I Receive Unemployment
Yes. When qualifying for bankruptcy, the Chapter 7 court looks at your income for the 6-month period prior to your bankruptcy filing date. If your income is lower than the Median Income for a household of your size, you can qualify automatically for bankruptcy. Below you will find totals for household size, monthly income, and annual income:
HOUSEHOLD SIZE MONTHLY INCOME ANNUAL INCOME
1 $3,992.00 $47,904.00
4 $7162.33 $85,948.00
Remember, the bankruptcy court is looking at the most recent 6 months of income. If you have been collecting unemployment, chances are you are well below these totals. Even if your income or your combined household income exceeds these totals, you may still pass The Means Test in bankruptcy. The Means Test looks at your overall income vs. your overall ongoing expenses. It represents an equitable approach to providing bankruptcy relief for those who make more than the Median Income, yet who still deserve debt relief.
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Speak To An Experienced Bankruptcy Attorney Today
This article is intended to be helpful and informative. But even common legal matters can become complex and stressful. A qualified bankruptcy lawyer can address your particular legal needs, explain the law, and represent you in court. Take the first step now and contact a local bankruptcy attorney to discuss your specific legal situation.
Being Unemployed May Count You Out Of Chapter 13
You might be looking to file a Chapter 13 over Chapter 7 in hopes of catching up on asecured debt for something you want to keep, like your house or your car. With a Chapter 13 bankruptcy, the main thing you need to prove is that you can make the payments to complete your plan. If you file bankruptcy with no income, then there is no source of money you can pay. Even if you are receiving unemployment income, this income will only help if the amount you get is enough to cover the payments in your plan, in addition to your regular monthly living expenses, which is pretty unlikely. For most people, being unemployed takes the Chapter 13 option off the table.
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Bankruptcy Window Of Opportunity
Chapter 7 bankruptcy allows debts to be wiped out without any payment to creditors.
Sounds good, right?
The catch is that you cant have too much income in order to be eligible.
If you had really high income before you became unemployed, and that was within the past 6 months, then you may not be able to file Chapter 7 for a little while, due to the means test .
But there will come a time when you will be ripe for filing a Chapter 7 case either during your unemployment, or possibly shortly after you regain employment.
This is your chance.
Wait too long, and you may end up earning too much income to file a Chapter 7 case, but not enough to be able to pay your creditors .
Do Stimulus Funds And Unemployment Affect Bankruptcy In Chapter 13
Unfortunately, if you are receiving unemployment income only, it may not be enough to show that you qualify for Chapter 13. If you are considering a Chapter 13 for the purpose of getting current on a mortgage or car loan, your incoming monthly unemployment will have to exceed your monthly expenses in order to successfully enter Chapter 13. Additionally, while the stimulus funds are helpful to your budget, they can not be factored in when considering your anticipated ongoing disposable income in a Chapter 13 filing. Again, these concerns are only for a Chapter 13.
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How Chapter 7 Bankruptcy Works
Chapter 7 bankruptcy wipes out qualifying unsecured debts, such as credit cards and medical bills. It works well for low-income filers who have little or no assets.
Debtors don’t lose everything in this chapter. They can keep the property they need to maintain a household and job, called exempt property. Nonexempt property that you can’t protect with an exemption gets sold and the sales proceeds are distributed to creditors.
In many cases, creditors don’t receive anything because the debtors don’t have any nonexempt property to sellbut that’s not always the case. The average Chapter 7 case takes approximately three to four months to complete.
How Does Unemployment Affect Bankruptcy
Many individuals are currently seeking advice regarding unemployment and bankruptcy. Prior to filing bankruptcy, when individuals are fighting off creditors, there are often questions as to whether unemployment can be garnished. We answered those questions in a previous post and the news is mostly good news. However, if you are tired of fending off creditors and want a permanent solution to cash flow, a Chapter 7 or Chapter 13 bankruptcy may be the answer.
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Chapter 13 During Georgia Unemployment
You may file for Chapter 13 bankruptcy if you are unemployed. But if you do not have any employment income, youll need to demonstrate you have some other form of income from a verifiable source that will allow you to afford the payments you schedule in your repayment plan. This could include unemployment benefits, Social Security Disability benefits or retirement benefits. Youll need to show the court you will be able to live up to your obligations in your repayment plan.
Coronavirus Unemployment And Bankruptcy: 5 Things To Know
- Coronavirus Unemployment and Bankruptcy: 5 Things To Know
You may be experiencing unemployment and deciding what to do next. You have options, so in this article, we will provide more specific information about filing bankruptcy and alternative options after being unemployed because of the coronavirus. Many people are facing job loss or temporary layoffs related to COVID-19 as more states impose mandatory stay-at-home orders. The financial crisis caused by the coronavirus could extend for several weeks or several months. For some individuals, the financial problems caused by the pandemic may result in filing bankruptcy.
The good news is that many people who did not qualify for Chapter 7 before COVID-19 may qualify for Chapter 7 after the COVID-19 crisis. Through a Chapter 7 bankruptcy filing, you might find the debt relief you need to get back on your feet after being unemployed because of coronavirus.
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Being Unemployed Can Help You Qualify For Chapter 7 Bankruptcy
Low-income debtors can get a fresh start by wiping out dischargeable debt in Chapter 7 bankruptcy. Not everyone is entitled to a Chapter 7 debt discharge, however. Your earnings must be low enough to pass the Chapter 7 means test. So if you’re unemployed and presumably have little or no income, you’ll likely qualify for Chapter 7 bankruptcy more readily than if you had a well-paying job.
Social Security And Bankruptcy
Another complication to filing personal bankruptcy, is that social security benefits are generally not included in the means test.
But some bankruptcy courts have held that unemployment compensation is a form of social security because under federal law unemployment compensation is funded through Social Security.
Again, like Connecticut, all states have made different decisions on this issue. Whether your jurisdiction views unemployment compensation as income or not, may make a difference in your ability to file Chapter 7 bankruptcy.
Either way, you are required to list unemployment compensation as part of your monthly income.
You may list it as a social security benefit and hope that it is excluded, but the Bankruptcy Trustee in your jurisdiction may disagree and include it.
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How Filing Bankruptcy Works When Youre Unemployed
You dont have to be employed to file bankruptcy. In fact, filing bankruptcy while unemployed will most likely make it easier for you to pass the means test. That being said, there are several ways that filing bankruptcy will be different if youre unemployed. Today well go over some of these issues, and how it might affect your case. Remember, the best way to file bankruptcy is to enlist help from a bankruptcy lawyer who can guide you through the process.
Are There Alternatives To Filing Bankruptcy
Although bankruptcy may often a viable option for many, there are alternatives to bankruptcy to consider. Debt consolidation is one way to avoid filing bankruptcy. Also, debt settlement can give you the relief you need without filing bankruptcy, but just be wary of the debt settlement option.
If you just need a planner to help you get debt freedom quickly, you may check out a Debt Payoff planner that can help you prioritize your debts and develop a monthly plan to pay off debts that works for you. The Savvy debt payoff method may help you avoid Chapter 7 while getting rid of debts.
Another option for you to consider is to check the bankruptcy reddit forum to understand what decisioning process others have gone through that have gone before you.
How Do I Discharge Unemployment Overpayment Debt In Bankruptcy
Debt incurred as a result of unemployment overpayments can be ejected in bankruptcy, but only if you werent responsible for the overpayment. In other words, the reason the overpayment occurred should be because the government made an error in computing your benefits or the vendor processing your payment made an error.
If you were overpaid benefits because you told a falsehood, gave a misstatement, or omitted important information, the debt cant be ejected in bankruptcy. This can also result in the unemployment office withholding or docking future benefits as a penalty. In particularly egregious cases, such as those where lying or omitting information was willful and intended to gain benefits, the matter may be criminally investigated as well.