Best Type of Bankruptcy for Unemployed Debtors

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If you have no income due to a job loss, a health condition that has left you unable to work, or divorce, you may have no ability to pay off your debts.  As a result, you may wish to claim Chapter 7 bankruptcy in order to eliminate some of your debts, as opposed to a Chapter 13 bankruptcy, which requires the repayment of some or all of your debts. 

Filing for Bankruptcy With Little or No Income

Filing bankruptcy with no income makes you eligible for a Chapter 7 debt discharge.  Since Chapter 7 bankruptcy requires that debtors meet the requirements of the bankruptcy means test, or have income that falls below the median income level for the debtors’ state, filing bankruptcy while unemployed falls within Chapter 7 eligibility guidelines.

Claim Chapter 7 Bankruptcy

Chapter 13 bankruptcy, which requires debtors to enter into a plan to pay all or a portion of your debts over a period of time, is not a possibility for the unemployed debtor.  Therefore, if you find yourself in this situation, you should claim Chapter 7 bankruptcy.  Because you are filing bankruptcy while unemployed, you automatically meet the requirements of new bankruptcy laws that govern Chapter 7 bankruptcy relief, including the Chapter 7 means test.

The Chapter 7 Means Test

The Chapter 7 means test requires that your income be beneath the median level of income for a family of your size, living in your state.  Every state has a different income level that serves as its Chapter 7 means test.  Thus, since you are unemployed, you have no income with which to pay your debts, and you would qualify for a Chapter 7 bankruptcy discharge.

Get Adivce from a Bankruptcy Lawyer

Because of new laws that restrict the filing of Chapter 7 bankruptcy petitions, as well as the complexity of the paperwork and other requirements of the bankruptcy process, you should seek the help of an experienced bankruptcy lawyer.  A bankruptcy lawyer can assess the facts and circumstances surrounding your situation, and best advice you as to the advantages and disadvantages of filing Chapter 7 bankruptcy.