How Does Unemployment Affect Bankruptcy?

Many individuals are currently seeking advice regarding unemployment and bankruptcy. Prior to filing bankruptcy, when individuals are fighting off creditors, there are often questions as to whether unemployment can be garnished. We answered those questions in a previous post and the news is mostly good news. However, if you are tired of fending off creditors and want a permanent solution to cash flow, a Chapter 7 or Chapter 13 bankruptcy may be the answer.

Can I Qualify For Bankruptcy If I Receive Unemployment?

Yes. When qualifying for bankruptcy, the Chapter 7 court looks at your income for the 6-month period prior to your bankruptcy filing date. If your income is lower than the Median Income for a household of your size, you can qualify automatically for bankruptcy. Below you will find totals for household size, monthly income, and annual income:

HOUSEHOLD SIZE                             MONTHLY INCOME                         ANNUAL INCOME

1                                                                  $3,992.00                                             $47,904.00

2                                                                 $5,078.83                                             $60,946.00

3                                                                 $5,660.92                                             $67,931.00

4                                                                 $7162.33                                              $85,948.00

 

Remember, the bankruptcy court is looking at the most recent 6 months of income. If you have been collecting unemployment, chances are you are well below these totals. Even if your income or your combined household income exceeds these totals, you may still pass The Means Test in bankruptcy. The Means Test looks at your overall income vs. your overall ongoing expenses. It represents an equitable approach to providing bankruptcy relief for those who make more than the Median Income, yet who still deserve debt relief.

Do Stimulus Funds Hurt My Bankruptcy Filing?

If you have received stimulus funds from the federal or state government related to the Coronavirus, the funds will not be counted as income for the purposes of determining whether you qualify for Chapter 7. However, those funds are part of the Bankruptcy Estate. This means that if you still have some of your stimulus funds on hand when you file bankruptcy, you will need to exempt them or risk losing them to the court. In most cases, the funds can be exempted, and your bankruptcy lawyer will explain how this works.

Do Stimulus Funds and Unemployment Affect Bankruptcy In Chapter 13?

Unfortunately, if you are receiving unemployment income only, it may not be enough to show that you qualify for Chapter 13. If you are considering a Chapter 13 for the purpose of getting current on a mortgage or car loan, your incoming monthly unemployment will have to exceed your monthly expenses in order to successfully enter Chapter 13. Additionally, while the stimulus funds are helpful to your budget, they can not be factored in when considering your anticipated ongoing disposable income in a Chapter 13 filing. Again, these concerns are only for a Chapter 13.

Speak With A Charlotte Bankruptcy Lawyer Today

Getting started with bankruptcy planning is easy. We are happy to discuss further with you how unemployment can affect bankruptcy. You can call us at 704.749.7747 for a free consultation or click HERE to request a phone call. A lawyer will call you today.