Can You Declare Bankruptcy if You Are Unemployed?
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Can You Declare Bankruptcy if You Are Unemployed?

The pitiful state of the job market right now has left many Americans in dire financial straits, wondering how to make ends meet. So the question is: can you declare bankruptcy if you are unemployed, or is bankruptcy protection reserved for those currently working?

Luckily, the answer is that many of the unemployed may be eligible to declare bankruptcy. In fact, in many cases, bankruptcy laws are designed for those who are out of work or have taken a significant pay cut. To learn details from a bankruptcy lawyer, please fill out this form and arrange a free, no-obligation consultation today.


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How Does Bankruptcy Work for the Unemployed?

Here's an idea of what you can expect if you choose to declare bankruptcy when you are unemployed.

  • The Chapter 7 means test: In order to qualify for Chapter 7 bankruptcy, potential filers must qualify under a comparison of household income and expenses. Those who are unemployed, are typically likely "pass" this test (that is, show that their income is lower than the median income in their state) and thus qualify to file for Chapter 7 bankruptcy.
  • The Chapter 13 repayment plan: Although you may be able to declare bankruptcy if you are unemployed, it may be difficult for you to declare Chapter 13 bankruptcy. That's because Chapter 13 (sometimes called "reorganization") requires filers to adhere strictly to a repayment-of-debt schedule – without the guarantee of regular income, you may not realistically be able to do so.
  • The liquidation sale: Assuming you file your case under Chapter 7 of the U.S. Bankruptcy Code, you may be subject to a liquidation sale. This involves your bankruptcy trustee selling at auction any of your assets that are not protected by state or federal bankruptcy exemptions. Any money raised from the liquidation sale can be used to repay your creditors in part.
  • The debt discharge: Generally, after a relatively short period (about four to six months), most Chapter 7 filers can expect to receive a debt discharge from the bankruptcy court. This discharge legally excuses them from paying any of the debts listed and is the official end of the bankruptcy case. After a debt has been discharged in bankruptcy, debt collectors and creditors no longer have any legal claim to that debt.

Learn More about Unemployment & Bankruptcy from a Bankruptcy Lawyer

If you're unemployed and ready to find out more about whether bankruptcy might be able to help you get back on your feet financially, you can take advantage of this opportunity to speak with a bankruptcy lawyer during a free legal consultation.


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