Can I File for Bankruptcy If I am Unemployed?

You just lost your job. You are drowning in debt. You do not have any income except for unemployment benefits. You are stressed out about money constantly.

Sound familiar? This scenario happens to Americans all the time. You may feel as though you will never get ahead, destined to be broke forever.

It is hard to pay your bills when you are unemployed. But there is debt relief available to you in the form of bankruptcy. In fact, it is not unusual for unemployed people to file a Chapter 7 bankruptcy case in an attempt to permanently eliminate credit cards, medical bills, and other debts.

Even if you are unemployed, bankruptcy is an option. It does not require you to work and earn income. There are other eligibility requirements, though, but as long as you meet the criteria, you can file for bankruptcy and be on your way to a debt-free life.

The main criterion in Chapter 7 bankruptcy is passing the means test. This test is a calculation that uses your income to determine your eligibility. If your income is at or below the median income for a household of your size in your state, you can file for bankruptcy.

The means test considers all income that you have received for six months prior to filing your bankruptcy case. Social Security benefits are excluded. While unemployment compensation does count as income for the means test, your benefits likely will not be higher than the median income for your household size, especially if you’ve been unemployed for more than six months.

You may be concerned because the bankruptcy process is not free. There are attorney fees, filing fees, and credit counseling course fees to pay. If your income is below 150% of the federal poverty guidelines, you may be able to get many of these fees waived. Plus, many bankruptcy lawyers offer free consultations so you can see if bankruptcy is the right choice for you without having to shell out thousands of dollars in lawyer fees.

What About Chapter 13 Bankruptcy?

As for Chapter 13 bankruptcy, the process would be a lot harder if you are unemployed. Chapter 13 is a repayment plan, which means you need to make monthly payments to cover your debts. If your only source of income is unemployment benefits, then you most likely do not qualify. You can file for Chapter 13, but the bankruptcy court would probably dismiss your case or convert it to Chapter 7.

Contact Us Today

Bankruptcy is not based on employment. If you meet the eligibility requirements, you can file for bankruptcy, regardless of your employment status.

Bankruptcy can seem like a complex process. If you have questions or concerns about bankruptcy, get them answered by Florida bankruptcy attorney Brian K. McMahon, P.A. We’ll walk you through the process from start to finish. Schedule a consultation today to learn more.

Fill out the online form or call our office at (561) 658-1789. We serve the West Palm Beach, Boca Raton, Port St. Lucie, and South Florida areas.