Can I File for Bankruptcy If I Am Unemployed?
In July 2022, unemployment rates in New York City were at 6.1 percent, and New York overall had rates at 4.4 percent. This means that hundreds of thousands of people are currently unemployed and struggling to pay their bills. If you are one of them, you might be wondering what options you have to get back on your feet.
For some unemployed individuals in New York, filing bankruptcy is an option that can help. Although the bankruptcy rules don’t require you to be employed, your past and present income can affect your ability to qualify. For example, you may not be able to file bankruptcy if you recently lost a high-paying job.
Let’s learn more about filing bankruptcy in New York when you’re unemployed and what to expect from the process. For more information about your specific case, schedule a free consultation with The Law Office of William Waldner.
How Your Employment Status Affects Bankruptcy
Chapter 7 bankruptcy allows you to cancel debt quickly, while Chapter 13 bankruptcy lets you keep your property in exchange for making payments toward a payment plan. Each type of bankruptcy filing has its own qualifications. Your bankruptcy filing will depend on the following:
- How long you have been unemployed
- Your income at your last position
- Whether you plan to start another job soon
- Whether you have another source of income
- Whether you plan to file for Chapter 7 or Chapter 13
Because each case is different, it’s helpful to write down a list of questions to ask a bankruptcy attorney. This will help you have an honest discussion about your current situation and what you expect things to look like in the next few months.
Chapter 7 Bankruptcy and Unemployment
Chapter 7 bankruptcy is a good option for low-income filers who have little or no assets. It wipes out most forms of unsecured debt, such as credit cards and medical bills. This way, you’re able to start fresh without the burden of bills you can’t afford.
Not everyone qualifies for a Chapter 7 bankruptcy in NYC, but being unemployed often makes it easier to do so. You’ll have to pass a means test that compares your household income against your state’s median income. If you don’t have enough disposable income to pay your creditors, you will qualify for Chapter 7 bankruptcy.
Passing a test will be difficult if you recently lost a high-paying job. Even if you are not earning at the moment, you’ll have to report the income you earned during the last six months, and if the number is high enough, you’ll fail the means test.
The best solution in this case is to wait a few months to drop your six-month average income. You will, however, have to report all unemployment benefits.
Chapter 13 Bankruptcy and Unemployment
It’s difficult to be approved for Chapter 13 bankruptcy when you’re unemployed. Why? Because Chapter 13 bankruptcy allows you to pay your creditors over time based on your income. You will get a three- to five-year repayment plan where you pay back a portion of your debts, allowing you to keep your property. But, you need income to make these payments.
Nevertheless, you can still file for Chapter 13 bankruptcy if you’re unemployed but have some income. You’ll need to show that your income is coming from a verifiable source and is enough to afford your payments each month. For instance, you might have a business or rental income.
You can also use unemployment benefits, retirement benefits or Social Security funds to make Chapter 13 bankruptcy payments. As long as there is verifiable income coming your way, the courts should approve your case.
Speak with an Experienced Bankruptcy Attorney in NYC
The Law Office of William Waldner will be happy to sit down with you and talk about your current circumstances. We can determine if filing Chapter 7 or Chapter 13 bankruptcy is right for you and what you will need to qualify.
Being unemployed is stressful, and bankruptcy can help while you get back on your feet. Contact our NYC bankruptcy lawyers today for an appointment and find out how unemployment can affect your bankruptcy filing.