Can I File for Bankruptcy if I Lost My Job?
According to data from the U.S. Bureau of Labor Statistics, about 16.8 million individuals lost their jobs in 2022. Losing a job can have a devastating effect on your financial and emotional health. When experiencing financial anguish after a job loss, filing for bankruptcy is an option to achieve debt relief. Fortunately, bankruptcy can help discharge some of your unsecured debts. However, your bankruptcy options will be limited since you have no source of income.
With over 30 years of combined experience, we have the resources to help individuals who are unemployed in bankruptcy-related matters. Our highly-skilled California bankruptcy attorneys will look at your financial situation and inform you about the different unemployed bankruptcy options that might be available to you. We proudly serve clients across San Mateo, San Francisco, Daly City, Oakland, South San Francisco, and Santa Clara County, California.
Impact of Job Loss on Bankruptcy
Job loss or unemployment is among the most common reasons to file for bankruptcy. In California, a person who is unemployed may be eligible to file for Chapter 7 bankruptcy. You will have to take the bankruptcy means test in order to qualify. Conversely, you may face different challenges if you’re seeking protection under Chapter 13 while unemployed.
Filing for Bankruptcy While Unemployed
As mentioned earlier, your eligibility for bankruptcy while unemployed and your chances of a successful petition will depend on the chapter you’re filing for.
Filing for Chapter 7 Bankruptcy While Unemployed
Chapter 7 bankruptcy helps individuals and business owners wipe out their general unsecured debts and achieve a fresh financial start. Essentially, you do not have to be employed to file for Chapter 7. Rather, the bankruptcy trustee will collect and sell your non-exempt assets and pay back some or all of your creditors with the net proceeds from the sale.
In order to be eligible for Chapter 7, you must complete the bankruptcy means test to show that:
your current monthly income is lower than the median income for your household size in your state, or
your disposable income is very low and may not be sufficient enough to repay your unpaid debts.
Since you’re unemployed, proving that you’re unable to pay your debts and bills will be quite easy. An experienced California Chapter 7 bankruptcy attorney can help determine your eligibility and direct you through the process.
Filing for Chapter 13 Bankruptcy While Unemployed
Chapter 13 is available to individuals who earn a reasonable income but are overwhelmed with debts. It involves proposing a structured repayment plan to settle your debts using your future income. However, since you’re unemployed and with no income, it may be difficult to show the court that you can meet up with the required monthly payments under your Chapter 13 repayment plan.
Although, you may be eligible to receive unemployment benefits following the job loss. Nonetheless, any income through unemployment benefits will barely be enough to cover your bills, mortgages, rent, and other living expenses. Hence, it is extremely difficult to qualify for Chapter 13.
You may face various challenges if you lose your job while amidst a Chapter 13 repayment plan. However, if you have income from rental, retirement benefits, Social Security funds, or other revenue-generating ventures, you may still qualify for Chapter 13. A skilled Chapter 13 bankruptcy attorney can evaluate your case or explore your other alternatives to bankruptcy.
Alternatives to Bankruptcy
Here are some other available alternatives to bankruptcy when you’re unemployed:
Debt settlement – This allows you to settle your outstanding debts for less than the actual amount you owe by proposing a huge lump-sum payment to your creditor.
Debt consolidation – This involves combining several debts, liabilities, loans, credit card debts, and other expenses into a single larger debt and taking out a new loan to repay your existing debts.
Debt management plan – A debt management agency can negotiate with each creditor on your behalf to reduce your payments and roll them into one.
Others: Other alternatives to bankruptcy include:
Forbearance
Deferment
Refinancing
A reliable attorney can tell you about the benefits and drawbacks of each bankruptcy alternative and determine the right debt relief option for you.
Turn to Us for Trusted Advocacy
Understanding your unemployed bankruptcy options and determining your eligibility is crucial when facing financial distress after a job loss. At EH Law Group, our attorneys are poised and ready to advise and guide consumers through the challenging procedures involved in filing for bankruptcy when unemployed.
As your legal team, we can examine your financial condition, determine if Chapter 7 or Chapter 13 is best for you, or explore your other debt-relief alternatives to help you achieve the financial relief you deserve.
Contact EH Law Group today to arrange a one-on-one consultation with practiced bankruptcy lawyers. We proudly serve clients across San Mateo, San Francisco, Daly City, Oakland, South San Francisco, and Santa Clara County, California.