Filing bankruptcy while unemployed

Like anything in life, you have to take the bad with the good. Sometimes, though, there is also some good that you can take with the bad. I have yet to meet someone who is ecstatic about being involuntarily unemployed. However, sometimes there is some “good” that comes with the “bad.”

It is not uncommon for employed people to be struggling financially and to be in debt and be unable to pay off their debts. While employed, though, those people will often continue to “tread water” and “survive” by making minimum payments towards their debts and basically hoping for the best. They may have looked into bankruptcy at one point or another and found out that their income made it difficult for them to qualify for a Chapter 7 bankruptcy due to the means test. They also may not have felt ready (or financially able) to commit to a Chapter 13 bankruptcy. So they continue to (barely) keep their heads above water.

Then tragedy (or “the bad”) strikes, and they lose their job. Maybe their company shut its doors or needed to do layoffs due to budget constraints. Suddenly it feels impossible to make even their minimum credit card payments each month. Here is where “the good with the bad” comes into play. It is generally a lot easier for people to pass the means test and qualify for Chapter 7 bankruptcy when they are unemployed – even if they are receiving unemployment. 

Of course, there are other positives and negatives to this situation. Every case (and person) is different, after all. When someone files bankruptcy, they want to be sure that they won’t find themselves in a worse financial situation shortly after filing bankruptcy. If someone doesn’t have health insurance, for example, it might be a good idea to wait to file bankruptcy until they are insured. 

Because every situation is unique, if you are considering bankruptcy, you should consult with a bankruptcy attorney.

Elizabeth Rosar Chermack is a Minnesota Bankruptcy Attorney, and can represent you in your bankruptcy matter.  Call (952) 491-0390 or send an email to liz@chermacklaw.com to schedule a consultation with Liz.

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Elizabeth Rosar Chermack, Attorney at Law, is a debt relief agency helping people to file for bankruptcy relief under the bankruptcy code.

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