Can I file bankruptcy if I'm unemployed?

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Answer: If you are unemployed and your debts are mounting, filing for bankruptcy might help you get back on your financial feet. Filing for bankruptcy will discharge many types of unsecured debt, like credit card debt, medical bills, and personal loans.  

If you have no income, you won't be able to file under Chapter 13. In Chapter 13 bankruptcy, you must agree to a repayment plan, to last three to five years, to pay off some or all of your debt. The plan will require monthly payments, and the court won't allow you to use Chapter 13 if it looks like you won't have the money to fund a plan. 

It's likely you will be eligible for Chapter 7 bankruptcy if you're unemployed. To use Chapter 7, you must pass the means test, intended to make sure you don't have enough disposable income to fund a Chapter 13 repayment plan. If your average income over the six months before you file is less than the median income in your state, you pass the test. So, if you've been unemployed for at least a couple of months, chances are good that your income falls below the state median.

If you just lost your job, however, it might make sense to wait and file your Chapter 7 bankruptcy case only after you're sure that your average income in the six previous months is less that the state median. 

Updated by: , J.D.

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