Although the economy is still in relative shambles as the result of its fairly recent meltdown, things do seem to be slowly picking up. However, the country, on a whole, isn’t quite out of the woods, and many individuals who were affected by downsizing and layoffs are continuing to feel the punch financially. In fact, plenty of people who lost their jobs over the past couple of years are still without work, and with unemployment benefits only going so far, it’s no wonder that more and more folks are finding themselves with no other choice but to consider filing for bankruptcy.
While nobody wants to be without work, when it comes to bankruptcy protection, being unemployed can actually put a person in quite an interesting – and perhaps favorable – position. After all, if a person doesn’t have any income coming in, then how can he be expected to repay his debts? And with the economy still being fairly shaky and employment prospects only slowly opening, who’s to say how long it might take a person to find a decent paying job?
Darren Hojnacki of the Atlanta-based firm Hojnacki & Hojnacki, LLC is a bankruptcy attorney who has been helping clients manage and settle their debts for the past three years, and according to him, being unemployed can actually be somewhat “helpful” as far as bankruptcy options are concerned. The reason for this is that when an individual files for bankruptcy, he basically has two choices: He can file for Chapter 13 and repay all of his debts over a three- to five-year period of time, or he can file for a Chapter 7 liquidation, thereby essentially making all of his debts go away. In the eyes of many bankruptcy attorneys, Chapter 7 is the more favorable option of the two, as it can make debts disappear and give the filer in question a fresh financial start. The only catch is that not everybody in need of bankruptcy protection can qualify for Chapter 7.
According to bankruptcy law, in order to become eligible for Chapter 7 protection, a person’s earnings must be equal to or below the median income in his particular area. If a person earns more than the median income, then despite his inability to pay his debts as they come due, he might not end up qualifying for a Chapter 7 filing. On the other hand, if a person is unemployed and therefore earning no money at all (other than perhaps a small check from the government), then his income is highly likely to fall below the area’s median, thereby giving him the option of seeking Chapter 7 protection. For this reason, Hojnacki feels that unemployment can actually come in handy for people who have no other choice but to file for bankruptcy.
On the other hand, while Chapter 7 is an appealing option for some, in other cases, it might not be the best way to go. The problem with Chapter 7 is that while it does absolve a person of all of his debt, it can result in foreclosure in the event that the filer is unable to pay his mortgage. Therefore, if a person is unemployed but wants to keep his home, then he might end up finding himself in quite a sticky situation, as his status might give him no choice but to file for Chapter 7 as opposed to Chapter 13. Therefore, while being unemployed can be helpful in some bankruptcy situations, this clearly is not always the case.
If you’re unemployed and are having a hard time paying your bills as a result, then you might want to consult with a bankruptcy attorney to gain a better understanding of your options. While Chapter 7 protection isn’t the best choice for everyone, it might end up being beneficial to you. After all, if you’re going to suffer the financial consequences of being unemployed, then you might as well use your situation to your advantage on the bankruptcy front.
This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Publication of this article and your receipt of this article does not create an attorney-client relationship.
