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 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 you won’t have a lot of assets to your name that can be liquidated. Chapter 7 is designed to help debtors with few to no assets by discharging non-secured debt, such as credit cards or medical bills. Because these individuals don’t have a lot in the way of assets, they can usually exempt most of what they own, which means your lack of employment probably won’t hurt you too much in the long run.
However, Chapter 13 bankruptcy cases could face some added difficulty. Chapter 13 bankruptcy requires you to create and submit a plan for paying off your debts to the court, usually over the span of three to five years. In general, these plans consolidate all or a portion of your debt to each creditor into one lump payment. 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) 839-9995 to request a free case evaluation.