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Unemployment is a common reason to file for bankruptcy in the United States.  If you are accumulating debt because you do not have a source of income, bankruptcy can help your situation.  However, depending on what type of bankruptcy you file for, your unemployment might still hinder your chance to erase your debt and start over.  Consider the kinds of bankruptcy that you can file for and pick the best option for your circumstances.

If you are unemployed, you should focus on filing a Chapter 7 bankruptcy.  Chapter 7 bankruptcy is designed to erase your unsecured debts.  This means that you will not have to pay back medical bills, credit card bills, or any dischargeable debt.  The only debts that you can’t erase in Chapter 7 bankruptcy are non-dischargeable debts such as student loans, child support, and alimony.  Chapter 7 bankruptcy is a good option if you are unemployed because it is targeted toward low-income debtors.  Usually, the creditors that you owe won’t receive anything to compensate for debt because you don’t have money to pay them and you also don’t have non-exempt property that they can take as collateral.

Being unemployed means that you will probably qualify for Chapter 7 bankruptcy because it is designed for people who have low income.  If your income is below the median of your state’s income, you will automaticall or texty qualify for Chapter 7 bankruptcy.  To determine your income and if you qualify for Chapter 7 bankruptcy, you can take a means test.  This test can be found online and you can take it for no cost.  If you qualify, you should apply for Chapter 7 bankruptcy.

If you do not qualify for Chapter 7 bankruptcy, you can apply for Chapter 13 bankruptcy.  However, if you are unemployed, you might have a hard time getting your application approved.  This is because Chapter 13 bankruptcy is designed to help you pay back your debt instead of erasing all of it for you.  You will have to design a repayment plan, and while it is easier to repay debt over the course of several years than to have no bankruptcy plan and pay it back all at once, this can be difficult if you don’t have a job.  You will have to prove to the court that you can afford a repayment plan or they will dismiss your request for Chapter 13 bankruptcy.  This generally means that you will need to find a job so that you have a steady income – a portion of which will go to creditors.

If you have no foreseeable way to maintain a steady income, you probably won’t be able to qualify for Chapter 13 bankruptcy.  However, if you are unemployed, you should seriously consider filing for Chapter 7 bankruptcy.  This type of bankruptcy is designed for people who do not have a high income.  If you need help filing for bankruptcy or determining your best option, you can contact me here.  I can review your options with you and ensure that you make the best choice.