You CAN file for bankruptcy if you’re unemployed – in fact, that’s what it’s there for
By: Darrell Castle
Can you file for bankruptcy if you’re unemployed?
Hi, I’m Darrell Castle and I’m an attorney licensed to practice law in the state of Tennessee and the answer to that question is YES, you can file for bankruptcy if you’re unemployed. In fact, that’s what bankruptcy is for.
Bankruptcy protection is for people who do not have enough income to pay their debts, and if you’re unemployed then you are devoid of income by definition. So, it is exactly what bankruptcy is for – for people who are unemployed; for people who are trying to discharge debts they just simply can’t pay like credit card bills, medical bills and things like that.
But, on the other hand, if you want Chapter 13 bankruptcy protection, then you need to have a source of income. Chapter 13 bankruptcy protection is for people who pay back their debts over a certain period of time.
Let’s say you have a house and you’ve lost your job and you’re in some sort of financial distress and have missed a few payments. Chapter 13 bankruptcy allows you to catch up on those payments gradually rather than all at once like the mortgage company might demand you to.
Chapter 13 will allow you to keep your car from being repossessed – maybe even lowering the payments; maybe even get the car back after it’s already been repossessed.
The thing about Chapter 13 is that you need to have a source of income, but you do not have to be employed. In other words, unemployment insurance can be used to finance your Chapter 13. Your unemployment check can fund it.
So, if you lost your job and stayed unemployed for a year, that’s okay in Chapter 13. The payments should be very affordable for you unless your debt is extremely high.
So, a Chapter 13 is a good option, even if you’re unemployed. A Chapter 7, by definition, is very good if you’re unemployed. That’s the way bankruptcy works for the unemployed.