Losing a job can be devastating for a household on many different levels. Not only can being unemployed affect you morally, but also financially, as losing a main source of income often makes it impossible to stay current on your bills. Many individuals who are unemployed start to use credit cards to simply make ends meet though the credit card payments themselves can quickly become overwhelming. For this reason and more, many unemployed individuals consider bankruptcy as a possible solution to regain control of their finances.

Unemployment can have an effect on the bankruptcy process though the specific effects will differ from case to case. One common factor that determines the effect of unemployment is which type of bankruptcy you choose to file—Chapter 71 or Chapter 13.2 The following is a brief explanation of how unemployment may affect your bankruptcy.

In order to qualify for Chapter 7 bankruptcy and have your qualified debts wiped out, you will have to show on the means test that your household income is below the median for your state or that you do not have enough disposable income to put toward your debts. Having one or more household member who is unemployed often decreases the household substantially, which often puts you below the median to allow you to automatically qualify for Chapter 7. In this way, unemployment often makes Chapter 7 bankruptcy a little easier for filers.

There are many reasons that you may choose to file for Chapter 13 instead of Chapter 7—even if you qualify for Chapter 7. However, in Chapter 13 bankruptcy, you will be expected to pay a certain amount to your creditors under a payment plan for three to five years before your debts are discharged. For this reason, courts require you to have some type of income with which to make payments. Many unemployed individuals receive unemployment, disability, or social security benefits that will still allow them to qualify for Chapter 13. If you have no income at all, however, your Chapter 13 case will likely be dismissed.

If you are unemployed and considering bankruptcy in or around Long Island, please do not hesitate to call the office of bankruptcy attorney Ronald D. Weiss at 631-319-9238 to discuss your options today.