Debtors do not have to hold a job to file for bankruptcy protection; in fact, unemployment is one of the biggest reasons people file for Chapter 13. However, your employment status can affect your case’s success and outcome. Below, you will learn how your unemployment can affect your bankruptcy proceedings.
Unemployment’s Effects on Bankruptcy Cases
The degree of effect depends on the bankruptcy chapter under which you are filing. Your unemployment simplifies the process in a Chapter 7 proceeding, but if you are filing for Chapter 13 protection, you may encounter problems if you can’t afford to abide by the repayment plan.
Unemployment and Chapter 13 Bankruptcy
According to chapter 13 bankruptcy rules, you can make monthly payments, which can rid yourself of a cumbersome second mortgage. You can also pay off car loans, or repay non-dischargeable debts such as spousal support, child support, or back taxes. Unfortunately, these benefits are unobtainable with Chapter 7 bankruptcy filing.
Because of the above factors, Chapter 13 is an ideal choice for those who don’t qualify for Chapter 7, and it’s also appropriate for those who just want the additional benefits. You’ll have to make a monthly payment to a court-appointed trustee; therefore, Chapter 13 is best if you have a steady income.
However, if you are unemployed but collecting from Social Security, unemployment benefits, rental income or other sources, you may still be able to file for Chapter 13. In short, if you can demonstrate that you have enough income to afford your monthly payment, your bankruptcy will likely meet the court’s approval.
If you do not have any reliable sources of income, the bankruptcy court will dismiss your petition unless you can prove that you can make your plan payments each month. If you become employed during your bankruptcy case, you’ll be required to tell the court or your trustee, and be prepared to provide additional documentation. Bankruptcy can be difficult, but it can also give you the financial fresh start you need. For help with Chapter 13 after losing your job, contact a Chapter 13 Bankruptcy Attorney in Royal Palm Beach.
