For many, losing your job is a worst-case scenario situation. However, when you pile on a considerable amount of owed debt, it can leave many wondering how to stay afloat during these times. If you had been considering filing for bankruptcy before you lost your job, you may think that option is unattainable. However, this is far from the truth. It is still possible and may be in your best interest to file for bankruptcy while unemployed. The following blog explores what you must know about these circumstances and how a Memphis, TN consumer bankruptcy lawyer can assist you through these challenging times.
How Can I File for Bankruptcy While Unemployed?
If you are unemployed and wish to file for bankruptcy, understanding your options is crucial. In general, you will likely qualify for Chapter 7 bankruptcy within six months of losing your job because only those who fall below the median income for their state for the previous six months can pass the means test to file for Chapter 7 bankruptcy.
In general, many prefer Chapter 7 bankruptcy because it is a shorter time period, usually around six months from filing to closing the case, and because it increases the chance that more debts will be forgiven.
Additionally, it may be challenging to qualify for Chapter 13, as this is a repayment plan. As such, it requires a steady income to ensure you are capable of paying creditors over the repayment period. However, if you have verifiable income that can supplement Chapter 13 bankruptcy, such as renting out a vacation property or retirement benefits, you may be able to qualify.
What Happens if I Lose My Job in the Middle of a Bankruptcy Case?
If employed before filing, it’s likely that you will file for Chapter 13 bankruptcy. However, if you lose your job in the middle of the repayment period, you may not know how to proceed. Generally, this option lasts three to five years, with monthly payments. However, if you become unable to pay due to job loss, you have options to help you through these times.
In the event you anticipate finding a new job quickly, you may be able to suspend your payments for a short period of time. However, if it will be a long period of time before you can find employment, you may be able to convert your bankruptcy to Chapter 7. However, this could impact your property. Finally, you may be able to have payments lowered if you obtain new employment that pays less than your previous job did.
When you are considering bankruptcy or worried about losing your job during this process, ensuring you have the assistance of an attorney to guide you through the complexities of bankruptcy is crucial. At the Arnold Law Firm, we understand how job loss can be anxiety-inducing. As such, we will walk you through the process of filing for bankruptcy while unemployed. Contact us today to learn how we can assist you.