Do you want to know how unemployment benefits may affect your bankruptcy eligibility? Learn more about this topic from Cherney Law Firm, LLC. Call us for more guidance.
Navigating Bankruptcy Eligibility Amidst Unemployment Benefits
Filing bankruptcy is never a pleasant experience. However, sometimes it is necessary. It could even make the difference between financial survival and financial catastrophe.
Navigating the complexities of bankruptcy and understanding its implications can be overwhelming. It’s natural to feel uncertain and worried about the impact it may have on your financial future. However, it’s crucial to remember that bankruptcy exists as a legal option to provide relief and a fresh start for individuals facing overwhelming debts.
If you’re currently receiving unemployment benefits or Social Security benefits, it’s important to know how it may impact your ability to file for bankruptcy. Generally, if you’re on unemployment benefits, you might not be eligible for Chapter 13 bankruptcy, but you may still qualify for Chapter 7 bankruptcy.
This article examines the difference between the two filings. It also considers the effect that unemployment compensation will have.
If you need to file for bankruptcy, consider seeking legal advice from a skilled and experienced bankruptcy attorney. At Cherney Law Firm, LLC, we handle Chapter 7 and Chapter 13 bankruptcy filings and can advise you on which filing is more apt for your particular circumstances.
The Difference Between Chapter 7 and Chapter 13 Bankruptcy Filings
Bankruptcy can be a daunting prospect, but understanding the different options available can help ease the uncertainty. In this context, it’s essential to explore the fundamental differences between Chapter 7 and Chapter 13 bankruptcy filings, as they offer distinct approaches to resolving financial difficulties.
Chapter 7 Bankruptcy Filing
Chapter 7 bankruptcy is often chosen by individuals who are unemployed or have minimal money left each month after essential expenses. It’s designed to help people who cannot afford to pay their debts. One of the advantages of filing for Chapter 7 is that you can eliminate certain debts relatively quickly, with an average time of around four months.
If you receive unemployment benefits, you will likely qualify for Chapter 7. The bankruptcy trustees might disqualify you only when you earn too much monthly income and not too little.
Additionally, this option is popular among the unemployed because it offers a fast process and does not require paying off all creditors. Remember, the granting of Chapter 7 discharges certain qualifying debts completely. This means you do not have to pay the debt back. Your mortgage or car loan is excluded. Medical bills and credit card debt are included.
Chapter 13 Bankruptcy Filing
If you have a steady income, even if you’re currently unemployed, you might lean towards filing for Chapter 13 bankruptcy. With Chapter 13, you commit to repaying your creditors through a payment plan that spans three to five years. However, it’s uncommon for unemployed individuals to qualify for Chapter 13 because these payment plans require regular substantial disposable income.
Being unemployed or receiving unemployment benefits doesn’t automatically disqualify you from considering Chapter 13 bankruptcy, but it’s not very likely to be approved.
If you happen to become unemployed while already under a Chapter 13 bankruptcy, the bankruptcy court will assess whether your unemployment income is sufficient to make the required monthly payment. If it’s not enough, the court may dismiss your Chapter 13 plan.
Understanding the Chapter 7 Means Test: Assessing Eligibility for Bankruptcy
The Chapter 7 means test is a crucial aspect of determining your eligibility to file for Chapter 7 bankruptcy. It helps assess whether your income level qualifies you for this type of bankruptcy or if you need to consider other options like Chapter 13.
The first stage of the means test is to compare your household income to the median income for your state. You will pass the test if your gross household income does not exceed your state’s median income for a household of your size. This will allow you to file.
To determine eligibility, add up the combined household income from the past six months, specifically the six months leading up to your bankruptcy filing.
Stage two of the test is applied if your median income exceeds the state’s median income. In stage two, you may deduct certain expenses from your income. If these calculations show that you have insufficient income to fund a Chapter 13 plan, then you qualify for a Chapter 7.
What Expenses Are Deductible?
You can deduct certain mandatory expenses. Expenses such as income tax, childcare, and mandatory income deductions.
Further deductions are then made for food, utilities, and housing costs. If, after deductions, you cannot make meaningful payments to creditors under a Chapter 13 plan, then you will qualify for a Chapter 7 filing.
What If You Find a Job While Under Chapter 7?
Once your income exceeds the median for your state and you no longer qualify under the Means Test, your bankruptcy case will be converted to a Chapter 13 bankruptcy by the bankruptcy court. In this case, a repayment plan will be required.
For delinquent debts such as a mortgage or auto loan, you’ll be required to pay monthly fees to each creditor. All remaining amounts are paid to unsecured creditors, including medical providers and credit card companies.
How Cherney Law Firm Can Help
At Cherney Law Firm, we understand that each case is unique and tailored to your specific circumstances. Our dedicated team of bankruptcy attorneys will conduct a thorough assessment of your financial situation and provide you with clear guidance on the best strategy moving forward to help you get back on your feet.
With years of experience and countless successful bankruptcy filings in the Metro Atlanta area, we have helped individuals and businesses achieve a fresh start through bankruptcy and alternative solutions. Whether you are facing financial hardship or overwhelming debt, we are here to support you every step of the way.
After a bankruptcy filing, our commitment to you doesn’t end. We can continue to provide legal advice and support to help you have the best chance at a brighter financial future.
Contact us today for a free consultation. Let us guide you through the process and find the best path toward financial recovery.