Unemployment and Bankruptcy

: Reese Baker & Associates

  Filed under: bankruptcy

Loss of income is one of the major causes of bankruptcy in America, not to mention, bankruptcies in Texas. If you become unemployed and can’t afford your current living expenses or debt obligations, bankruptcy can offer solutions to keep your property and discharge unsecured debts. Deciding which type of bankruptcy you qualify for, however, will depend on a number of factors including how long you’ve been unemployed, your income, and the amount of property that you own.

Filing for Bankruptcy While Unemployed

To file Chapter 13 or Chapter 7 bankruptcy, there is no requirement to be employed, however, if you have received any income through a job, unemployment benefits, or investment income, the bankruptcy courts do take this into account. In order to formulate your current income, US Bankruptcy Courts use your average earnings of the 6 months directly prior to filing your bankruptcy paperwork.

In order to file Chapter 7 bankruptcy, you must first fill out a means test form which compares your prior 6-month average income with the mean average income in your bankruptcy district. If it is too high, based on leaving a high-income job, you won’t qualify for Chapter 7. In Chapter 13 cases, alternatively, you must have a form of income in which to fund the repayment plan. Therefore, filing for bankruptcy while unemployed involves a solid bankruptcy strategy in which the timing of the bankruptcy case is taken into account.

Getting a Job after Filing Bankruptcy

In some instances, an individual will file for a Chapter 13 bankruptcy in Texas, only to receive an employment offer afterward. It’s important to ensure that actually make it through the entire employment process before revising your bankruptcy plan or asking to have it dismissed. While you can’t be fired for filing bankruptcy, if your prospective company has standard credit checks as part of its normal onboarding, it could cause your offer to be rescinded, or at the least a second conversation surrounding the events of your bankruptcy. Once you have landed a new position, you can contact your Houston bankruptcy attorney for next steps, as this may change the substance of your bankruptcy protection drastically.