As the job market continues to move up and down, some are thinking about what might happen if they’re unemployed for an extended period of time without income.
In the worst-case scenario, it might mean turning to bankruptcy if unemployment benefits run out and prolonged unemployment becomes a reality. It’s important to look at how being unemployed affects the success of Chapter 7 or 13 bankruptcy.
Unemployment and Chapter 7 Bankruptcy
To qualify for Chapter 7, the debtor should pass a “means test” – meaning that his household income is compared against his state’s median income for a similar-sized household. This median income figure is calculated using the previous six month’s income. So, if the debtor recently lost a high-paying job, passing will be tough, even though he currently has no income.
If you have recently lost your job and are concerned as to whether you qualify for a Chapter 7 bankruptcy, consult with an experienced bankruptcy attorney to determine what options you might have to help you solve any problems the means test could cause your bankruptcy.
Unemployment and Chapter 13 Bankruptcy
Chapter 13 requires that the debtor receive a regular income and that this income be used to fund a plan to pay back debts and regular monthly bills. In addition to regular employment income, wages, and unemployment compensation, debtors may fund reorganization plans with income from received from other sources including business, rentals, Social Security or retirement, so there are options available beyond the traditional income channels.
Extended unemployment can be a frustrating and difficult time and bankruptcy may seem like a viable option, but it’s important to understand how the proceeding works before filing. Call Natural State Law today at (501) 916-2878 to discuss your personal situation with one of our qualified bankruptcy attorneys to better understand your option.