Filing for Chapter 7 bankruptcy while unemployed can have advantages in certain situations, but it’s essential to consult with an experienced bankruptcy attorney and consider your individual circumstances carefully. As a general matter, there are often numerous reasons why someone might choose to file for Chapter 7 bankruptcy while still unemployed.
Eligibility for Relief Under Chapter 7 of the Bankruptcy Code.
Chapter 7 bankruptcy has income eligibility requirements based on your household income in relation to the comparable median income in your area. 11 U.S.C. § 109. The United States trustee publishes and maintains a median income information for various household sizes. If you are currently unemployed, your income is likely to be lower, which can increase your chances of qualifying for Chapter 7. Waiting to file bankruptcy until you’re employed again may result in a higher income, making you ineligible for Chapter 7.
Get the Fresh Start You Need Now.
Chapter 7 offers a “fresh start” to eligible debtors. After meeting the basic requirements of a debtor in a Chapter 7 bankruptcy case, individual filers become entitled to a discharge. 11 U.S.C. § 727. By discharging most of their unsecured debts, such as credit card debt and medical bills, unemployed people often find themselves with a little more financial breathing space as they seek out employment. Moreover, by filing while unemployed, individuals can file bankruptcy and eliminate their debts sooner and get a head start in rebuilding their financial lives.
Asset Protection. Keep What You Have After Filing a Bankruptcy Case.
The United States Bankruptcy Code allows consumer debtors to keep certain essential assets through exemptions provided under federal or state laws. 11 U.S.C. § 522. Depending on state exemption laws, you may be able to select either the state or federal exemption scheme. Selection of the optimal exemption scheme, and prudent application of available exemptions are critical decisions, which you should discuss with your bankruptcy attorney.
Stress Reduction. Putting It All Behind You.
Financial distress can weigh heavily on people’s unemployed minds, increasing their anxiety and presenting a further barrier to rebuilding. The decision to file a bankruptcy case generally results in an “automatic stay,” relieving distressed consumer debtors from the persistent efforts of debt collectors, and the stress associated with mounting debt. In contrast, waiting for reemployment means continuing to deal with with ongoing creditor harassment and legal actions.
Bankruptcy as a Strategy for a Brighter Future.
Timing is crucial in bankruptcy cases. If you are unemployed but anticipate a return to stable employment in the near future, a bankruptcy discharge may lay the groundwork for you to retain more of what you earn. However, it is essential to consult with an experienced bankruptcy attorney to evaluate the impact of filing bankruptcy in your particular circumstances. The professionals at Robleto Kuruce will help you make an informed decision about the timing of a bankruptcy filing.