Sudden job loss can make a big trouble on your finances. If you are having difficulty coping up with your expenses for several months, bankruptcy can provide you a help that you need the most. There are questions asked whether a person needs to be employed or not to file for bankruptcy? The answer is no. It is not necessary to be employed for bankruptcy filing. Although a person may need to consider the probability of acquiring debt while employed. Most of the time, being unemployed can qualify a person for Chapter 7 or permit to pay less to unsecured debt for Chapter 13 bankruptcy. Although you are more likely to disapproved of chapter 13 if you do not have enough money to afford the repayment plan.
Chapter 7 Bankruptcy Filing While Unemployed
As mentioned above, it would be easier for a person to qualify for Chapter 7 if he is unemployed. This type of bankruptcy is created to help low income debtors get a fresh start by eliminating their dischargeable debts. Dischargeable debts include collections, credit card debt, lawsuits, medical bills, pay day loans, personal loads, overdue utility bills and repossessions. While non dischargeable debt includes most tax debt, child support and student loans.
In order to qualify for this type of bankruptcy, the income must have low enough and must pass a means test which resemble to “median income level”. If the result is below the median income level, the person can be qualified for chapter 7 debt relief. If the outcome is above the median level, the person can still qualify for chapter 7. To make it happen, a debtor must state that there is no remaining income in their budget. This is done with a means test.
Means test is done by assessing the person’s monthly income. From here, deductions are applied such as insurance, everyday expenses, taxes and other allowances. After all the deductions are utilized, the means test provides the disposable monthly income. If the result is low, you will be qualified for chapter 7 bankruptcy.
Chapter 13 Bankruptcy Filing with Regular Income
Chapter 13 reorganize debt with regular income. It is also a way to catch up on missed mortgage payment. This type of bankruptcy removed unsecured mortgages such as car loans and non-dischargeable priority debt. Majority of unemployed individuals file for Chapter 7 to remove unsecured debt. However, if you are trying to save your car or home by paying the missed payment and child support debt, filing chapter 13 is the right option.
You are more likely to create a plan on your debt for over 3 to 5 years using a monthly payment plan. In this way, you should have enough money to afford the monthly payment plan. If there are any other available source of income like Social Security, pension, retirement income, business or pension, you can afford for Chapter 13 bankruptcy. If you cannot show in the court that you cannot afford the repayment plan created in chapter 13, you will be dismissed.
Chapter 13 can eliminate debt such as medical bills, credit cards, lawsuit, repossessions, pay day loads, personal loads and overdue bills. It can also prevent foreclosure on properties, stop garnishment and organize tax debt.
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