Can the unemployed file bankruptcy?

Yes, the unemployed can file bankruptcy. However, filing the specific bankruptcy chapter depends on peoples, or debtors, income. For instance, chapter 13 is legally requires debtors to pay secured and unsecured creditors through a repayment plan. The repayment plan usually lasts anywhere from three to five years and requires debtors to pay a bankruptcy trustee. Since chapter 13 requires debtors to pay, they must need enough disposable income to do so. Therefore, unemployed people interested in filing chapter 13 can do so as long as they have enough disposable money from their sources of income. This means that if they are receiving unemployment benefits, public benefits such as welfare, social security or pension payments they may be eligible to file chapter 13.

Chapter 7 is the second personal bankruptcy option. Unlike chapter 13, chapter 7 doesn’t require debtors to pay creditors back. In fact, chapter 7 is just for unsecured debts such as credit card bills, medical bills and payday loans. Chapter 7 doesn’t require debtors to have income to legally eliminate their debts.

Personal bankruptcy depends on many eligibility factors. One eligibility factor is income. For debtors to find out which bankruptcy chapter they are allowed to file for, they must complete a means test. Individuals who fail the means test can file chapter 13. However, if they pass the means test, then they can file chapter 7. There are more eligibility requirements debtors must complete such as pre-bankruptcy credit counseling. Therefore, debtors should contact a bankruptcy lawyer before filing bankruptcy.