Can I File for Consumer Bankruptcy Even if I am Unemployed?
The COVID-19 pandemic has resulted in millions of job losses across the country, and residents of Oak Park and other parts of Chicagoland have been affected in devastating ways. Even before the pandemic, many Illinois residents were struggling with debt, and the coronavirus emergency has worsened many difficult financial situations for individuals and families alike. As COVID-19 relief measures begin ending and jobs still remain somewhat scarce, many people are considering the possibility of filing for personal bankruptcy. Yet many of these debtors are unemployed and want to know whether they can for consumer bankruptcy despite being unemployed.
Whether or not unemployment will affect your eligibility for bankruptcy will depend upon the type of bankruptcy you want to file. Let our experienced Oak Park consumer bankruptcy lawyers say more.
Differences Between Chapter 7 and Chapter 13 Bankruptcy
To determine whether or not being unemployed could affect your bankruptcy case under current bankruptcy law, you will need to know the differences between Chapter 7 and Chapter 13 bankruptcy, and which type you plan to file.
In a Chapter 7 bankruptcy case, being unemployed might actually make it easier for you to pass the required “means test” and to be eligible for Chapter 7 bankruptcy. This is a form of liquidation bankruptcy, and consumers are only eligible to file for this type of bankruptcy if they can show that their income and assets are low enough. To show that their income and assets are low enough for Chapter 7 eligibility, a debtor seeking to file for this type of bankruptcy usually needs to pass the “means test.” The thinking behind the “means test” is that it does not make sense to discharge an individual’s debts if that individual makes enough money, or has sufficient assets, to repay those debts through a Chapter 13 bankruptcy plan, for example. Accordingly, if you do not earn an income, you may be more likely to qualify for Chapter 7 bankruptcy.
However, if you are unemployed and want to file for Chapter 13 bankruptcy, your unemployment may pose a serious problem. This type of bankruptcy is often known as a “wage-earner’s plan” since the debtor must be able to prove to the court that they will have the ability to make regular payments, over a three-to-five-year period, on a repayment plan. Being unemployed typically means you will not qualify for Chapter 13 bankruptcy. For debtors who were hoping to file for Chapter 13 bankruptcy to avoid foreclosure, unemployment can present a significant hurdle.
How Unemployment Benefits Could Affect Your Case
You also might be wondering if unemployment benefits could affect your bankruptcy case. Generally speaking, unemployment benefits are unlikely to affect your case significantly. For most debtors who are unemployed, unemployment benefits do not provide enough money that the debtor would no longer be eligible for Chapter 7 bankruptcy. And since unemployment benefits are not significant, typically they cannot make a debtor eligible for Chapter 13 bankruptcy.
However, you should always discuss the specifics of your case with a bankruptcy attorney.
Contact an Oak Park Consumer Bankruptcy Lawyer
At the Emerson Law Firm, we know how difficult it can be to struggle with debt, and we know that bankruptcy can be an important tool for individuals and families who want to avoid foreclosure or to get a fresh start financially. When you are unemployed, the prospect of going through a legal proceeding can seem daunting, but our Oak Park bankruptcy attorneys are here to help. Contact the Emerson Law Firm today for more information.
See Related Blog Posts:
Asset Protection in Your Bankruptcy Case
Do You Know the Difference Between Bankruptcy Facts and Fictions?
Whether or not unemployment will affect your eligibility for bankruptcy will depend upon the type of bankruptcy you want to file. Let our experienced Oak Park consumer bankruptcy lawyers say more.
Differences Between Chapter 7 and Chapter 13 Bankruptcy
To determine whether or not being unemployed could affect your bankruptcy case under current bankruptcy law, you will need to know the differences between Chapter 7 and Chapter 13 bankruptcy, and which type you plan to file.
In a Chapter 7 bankruptcy case, being unemployed might actually make it easier for you to pass the required “means test” and to be eligible for Chapter 7 bankruptcy. This is a form of liquidation bankruptcy, and consumers are only eligible to file for this type of bankruptcy if they can show that their income and assets are low enough. To show that their income and assets are low enough for Chapter 7 eligibility, a debtor seeking to file for this type of bankruptcy usually needs to pass the “means test.” The thinking behind the “means test” is that it does not make sense to discharge an individual’s debts if that individual makes enough money, or has sufficient assets, to repay those debts through a Chapter 13 bankruptcy plan, for example. Accordingly, if you do not earn an income, you may be more likely to qualify for Chapter 7 bankruptcy.
However, if you are unemployed and want to file for Chapter 13 bankruptcy, your unemployment may pose a serious problem. This type of bankruptcy is often known as a “wage-earner’s plan” since the debtor must be able to prove to the court that they will have the ability to make regular payments, over a three-to-five-year period, on a repayment plan. Being unemployed typically means you will not qualify for Chapter 13 bankruptcy. For debtors who were hoping to file for Chapter 13 bankruptcy to avoid foreclosure, unemployment can present a significant hurdle.
How Unemployment Benefits Could Affect Your Case
You also might be wondering if unemployment benefits could affect your bankruptcy case. Generally speaking, unemployment benefits are unlikely to affect your case significantly. For most debtors who are unemployed, unemployment benefits do not provide enough money that the debtor would no longer be eligible for Chapter 7 bankruptcy. And since unemployment benefits are not significant, typically they cannot make a debtor eligible for Chapter 13 bankruptcy.
However, you should always discuss the specifics of your case with a bankruptcy attorney.
Contact an Oak Park Consumer Bankruptcy Lawyer
At the Emerson Law Firm, we know how difficult it can be to struggle with debt, and we know that bankruptcy can be an important tool for individuals and families who want to avoid foreclosure or to get a fresh start financially. When you are unemployed, the prospect of going through a legal proceeding can seem daunting, but our Oak Park bankruptcy attorneys are here to help. Contact the Emerson Law Firm today for more information.
See Related Blog Posts:
Asset Protection in Your Bankruptcy Case
Do You Know the Difference Between Bankruptcy Facts and Fictions?
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