Losing your job is stressful enough, but when debts start piling up without a steady paycheck, it can be overwhelming. Fortunately, unemployment doesn’t prevent you from filing a Chapter 7 bankruptcy to clear eligible debts.
Things unemployed filers need to know
Unemployment often makes Chapter 7 the most practical solution to erase eligible unsecured debts. Here are a few essential factors unemployed filers should know, including:
- Passing the means test is easier: Chapter 7 involves a means test comparing income to the state median. Since this evaluates the previous six months of earnings, recent unemployment often makes it easier to qualify.
- Counting unemployment compensation as income: Any unemployment benefits received except social security benefits are counted as income on your bankruptcy schedules.
- Filing fee waivers are available: If household income is below 150% of the federal poverty line, filers can ask the bankruptcy court to waive the filing fee or pay in installments.
- Bankruptcy exemptions protect your essential property: Filers could use state or federal bankruptcy exemptions to protect essential assets up to specific statutory limits.
Because most unemployed individuals own primarily exempt property, Chapter 7 usually allows them to wipe out their debt without losing their day-to-day possessions.
Stepping toward a better future
Unemployment doesn’t block you from seeking debt relief. Often, this makes it easier to qualify for a fresh start. If medical debt or unpaid bills are accumulating while you search for work, reaching out to a skilled bankruptcy attorney could help you protect your assets and find your financial footing.
