“Can I file for bankruptcy if I’m unemployed?”

It’s a question I frequently hear as a Memphis bankruptcy attorney, and the answer is yes. Many unemployed people file for bankruptcy — there’s nothing wrong with it.

It makes sense, too. Bankruptcy offers relief during hard times. People often struggle with their finances after losing a job, and a significant portion of people filing for bankruptcy each year cite unemployment as a leading factor.

How unemployment affects your bankruptcy process depends on the type of bankruptcy you’re filing — either a Chapter 7 or a Chapter 13.

Chapter 7 Bankruptcy and Unemployment

Chapter 7 bankruptcy allows you to get rid of unsecured debts — including credit card debt, medical bills, and some tax debt — relatively quickly and without paying them back. Because you don’t have to make payments towards the debt in a Chapter 7, this is typically a good option if you’re unemployed.

In fact, unemployment may actually help you qualify for Chapter 7. Tennessee law requires you to pass a means test, which compares your income against the state’s median income. The test determines whether or not you can pay your bills instead of discharging them. Throughout my 30+ years as a Memphis bankruptcy attorney, I’ve seen many unemployed clients pass the test, based on their income.

Chapter 13 Bankruptcy and Unemployment

There’s another type of bankruptcy for individuals, Chapter 13 bankruptcy. People typically turn to Chapter 13 if they are behind on secured debts, like mortgages or car payments. Chapter 13 consolidates those debts into affordable payments, spread out over 3-5 years.

Because you’re making regular payments for several years with a Chapter 13, you do need some kind of regular income. However, in many cases, unemployment benefits can cover the payments. An experienced Memphis bankruptcy attorney can work closely with you to determine which process is best for your specific situation.

Get Relief During Hard Times: Talk to a Memphis Bankruptcy Attorney Today

When you’re weighed down by debt, it may seem like there’s no way to break free from the constant worry and stress. But there is. Bankruptcy offers a fresh start. It will clear your financial slate and set you on the path to a life you deserve.

If you’re considering bankruptcy, we’d like to talk to you. Our experienced lawyers can give you a free consultation to discuss your options and answer any questions you may have.

Call (901) 327-2100 or contact us here to set up your appointment.