I Just Lost My Job, The Bills Are Still Coming In. Should I File For Bankruptcy?

US, Bankruptcy, Court, Chris Wesner

Bankruptcy will get rid of medical debt, credit card debt, and debt on repossessed vehicles

Bankruptcy is a POWERFUL tool that gives people in financial trouble breathing room so that they may get their fiscal affairs in order. Once a bankruptcy is filed, that person or persons (if married) are not allowed to be contacted by creditors and debt collectors. Most of the time creditors quit calling within a day or two of filing.

SEE ALSO: The Automatic Stay and Summary

But, you may be asking what if I don’t have any income because I lost my job? Can I still file for bankruptcy? The answer is YES. In fact, it may be the best time to file. While the bankruptcy code is a complex beast, your income level often determines what type of bankruptcy an individual may file. If you have little to no income, you are eligible for a Chapter 7 bankruptcy. If you are a high income earner, you may not be eligible for a Chapter 7 bankruptcy.

That is all good news, but keep in mind that debt incurred after the bankruptcy petition is filed is NOT discharged. This will likely be an issue for someone with no income from job loss. Don’t fall into that trap.

How Income affects bankruptcy filings

An example:

Bill is a former Dephi employee who lost his job and is currently living in Dayton, Ohio. While working a Dephi he earned over $50,000 per year. He had incurred his everyday living expenses along with a mortgage and car payment. Then he lost his job. Well, in this scenario, Bill would likely not be eligible for a Chapter 7 discharge if he was earning $50,000 per year, so he might be required to file a Chapter 13 petition. However, if Bill lost his job 3 months ago, the Bankruptcy Court would view his income in a much different light and allow a Chapter 7 discharge. A lot of times bankruptcy is an issue of timing. You need EXPERIENCED counsel to determine what and when you should file.

The Bankruptcy Court determines your income based on the prior six month of wages. As you can see in the above example, when Bill is working full time his income is $50,000 per year, but after 3 months of $0 income, the Bankruptcy Court would calculate his income to be $25,000 per year.

See Also: Bankruptcy Basics

While not having employment is usually not ideal, it may just be the perfect time for a Chapter 7 Bankruptcy filing. Contact us today if you need assistance.

Leave a Reply

Your email address will not be published. Required fields are marked *