Can I File for Bankruptcy If I Am Unemployed?


If you are overburdened with debt due to a recent job loss, you may feel like you are running out of options. Fortunately, there is no requirement that you have to be employed in order to file for bankruptcy. In fact, this is the most common reason why people file. While being unemployed may limit your options, in terms of what chapter you will be able to file under, bankruptcy is still a viable option for those without an income.

Call our firm today to learn more about your options.

How a Lack of Income Could Affect Your Options

In some cases, being unemployed may actually make the bankruptcy process easier—especially if you are filing under Chapter 7. However, being unemployed could create certain problems if you are hoping to file under Chapter 13. In a Chapter 13 bankruptcy, you would need to create a “repayment plan” and show the court that you intend to make regular, monthly payments over the next three to five years.

If you are not earning a consistent income, you may have a hard time getting your Chapter 13 repayment plan approved. Luckily, you may still qualify for Chapter 7 bankruptcy. Unlike Chapter 13, Chapter 7 would provide immediate debt relief by wiping out most, if not all, of your unsecured debts. Since the court is willing to forgive more of your debt, however, you must first take the means test to see if you qualify.

Qualifying for Chapter 7 Bankruptcy

To determine whether or not you qualify for Chapter 7, you will need to take what is called the “means test.” This test will compare your household income against your state’s median income for a household of the same size. If your income falls below the median, you automatically qualify. If you are above the median, you will need to show that you do not have enough disposable income to repay your debts.

If you are currently unemployed, you will normally fall well below the Chapter 7 income limits—even if you are currently collecting unemployment benefits. So in this regard, being unemployed may actually make it easier for you to file under Chapter 7. Not only will this process wipe out your unsecured debts in just a few short months, but it will also give you the chance to start fresh with a clean slate.

Would I be able to file for Chapter 13 bankruptcy?

Chapter 13 bankruptcy would require you to repay all or a portion of your debts over three to five years, which is why this type of bankruptcy may be preferable for debtors with a regular income. That is not to say, however, that it isn’t possible for you to file under this chapter if you are unemployed. If you are collecting unemployment, social security or another source of income, you may be able to qualify.

Call Our Office Today for a Free Consultation

At Leonard V. Sominsky, ESQ., PC, we know that bankruptcy can be confusing—especially if you have never been through this process before. We encourage you to let our firm handle the heavy lifting so that you can focus on getting your finances back on track. We have been assisting debtors throughout Phoenix and all surrounding areas since 2000, helping thousands of individuals and families along the way.

If you are ready to put an end to your debt, please contact our firm for a free consultation. All calls are returned within 24 to 48 hours.