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Can I File for Bankruptcy if I'm Unemployed?

If you lose your job, it’s easy to fall into a spiral of financial hardship. In today’s job market, it can be extremely difficult to find stable employment again, especially if you need to do so quickly in order to take care of your family. This means it’s also not uncommon for unemployment to lead to someone needing to declare bankruptcy. However, can you declare bankruptcy if you don’t have a source of income? Let’s take a closer look at what the law says regarding this process.

What Does the Law Say?

Fortunately for those who are out of work and facing the pressure of serious financial trouble, there is no legal requirement that you are employed in order to file for bankruptcy. In fact, the law doesn’t dictate anything regarding your employment status at all when it comes to filing. That being said, your employment status could have an impact on your case still.

Chapter 7

Chapter 7 bankruptcy won’t be affected all that much by your lack of employment. In fact, you may actually find it easier to proceed with Chapter 7 if you’re unemployed simply because your income will most likely fall below the median income threshold required for the number of people in your household. Chapter 7 is designed to help debtors with very litte income and very few to no assets. It allows debtors todischarge non-secured debt such as credit cards,medical bills, personal loans, etc.. Therefore, your lack of employment will not hinder your ability to file for a Chapter 7 bankruptcy.

Chapter 13

However, Chapter 13 bankruptcy cases could face some added difficulty. Chapter 13 will allow you to consolidate your unsecured debts and pay back a percentage of your debt to creditors based on what you can afford to pay back. Your attorney will look at your monthly income and compare that to your monthly living expenses to see what you have left over. This left over amount is called your disposable income, which gets paid to the Trustee’s office each month. The Trustee’s office will then distribute these funds accordingly to your creditors. Once the plan has been completed, you’ll find yourself debt free and on your way back to financial independence. However, you’ll find it pretty difficult to get your plan approved if you can’t afford your monthly payments due to a lack of income.

That’s not to say you can’t choose to file for Chapter 13 if you are unemployed. If you collect unemployment benefits, social security, or receive replacement income from an injury lawsuit, you could use these benefits to fund your plan. However, you’ll have to show that your case makes financial sense to the court.

If you’re considering declaring bankruptcy, let a Myrtle Beach bankruptcy lawyer from Lam Law, LLC help you! Contact us today by dialing (843) 695-7700 to request a free consultation.

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