When a person is already in a lot of debt and they lose their job, it can feel as though they’re drowning and there’s nothing that can be done. When people are in this position, they may wonder if bankruptcy is an option for them. The truth is that it may be an option to provide debt relief. If you’re in this position then you can read on for more info, then contact The Law Offices of Paul Y. Lee at 951-755-1000 for a free bankruptcy consultation.
Is a job required to file bankruptcy?
The Bureau of Labor Statistics released its most recent unemployment numbers and found that about 4% of people are unemployed throughout the country, while California’s rate is a little higher at 4.3%. When a person loses their job but has bills coming in, it’s common for a single unexpected car repair bill or medical bill to completely devastate them financially.
The good news is that there may be a solution in bankruptcy. No one should have to struggle day after day just to make ends meet. If you find yourself in this terrible situation then you may need to learn more about how to file bankruptcy.
Chapter 7 and Chapter 13 bankruptcy are the main options for you
There are actually more than a dozen types of bankruptcy, but for most individuals the options are narrowed down to Chapter 7, which is sometimes referred to as liquidation bankruptcy, or Chapter 13, which is sometimes referred to as reorganization bankruptcy. Both will provide debt relief but in very different ways. For Chapter 7 bankruptcy, the fact that you’re unemployed could be an advantage, while it would be a disadvantage if you wanted to file Chapter 13.
Means testing Chapter 7 bankruptcy for an unemployed person
If you want to file Chapter 7 bankruptcy in California, you’ll have to go through a step called means testing. It essentially calculates your ability to repay your creditors. If your income is lower than the median income for a similarly sized family – which is almost guaranteed if you’re unemployed – then you will pass this means test, which means you can file Chapter 7.
Means testing will take your last six months of gross income into account. As a result, you may not want to file immediately after being laid off. If Chapter 7 is the best option for you then you can count on us to offer advice on the right timeline to file.
Chapter 13 bankruptcy is a challenge for an unemployed person
Though there’s no rule that prevents an unemployed person from filing Chapter 13 bankruptcy, this options essentially reorganizes debt and pays it back. The courts must approve the filing and they must believe that you have the ability to pay it back. If you’re unemployed, it will be difficult to prove that.
The bottom line is simple: If you feel that bankruptcy may benefit you then you should contact The Law Offices of Paul Y. Lee at 951-755-1000 for a free bankruptcy consultation.
