The world has changed significantly in the last three years, and the instability and uncertainty seem to have become our new normal. Health and financial issues have dominated the headlines, and many people are unexpectedly dealing with lost wages, unemployment, and rising inflation. 

If filing for bankruptcy carried a stigma before 2020, that stigma has basically gone up in smoke. After all, everyone is dealing with challenges and circumstances that are essentially out of their control. Filing for bankruptcy is a solution more easily understood against the backdrop of the last three years.  

When an individual is living with overwhelming debt and unemployment, viable solutions may be difficult to see. Chapter 13 bankruptcy is an option, but is someone who receives unemployment benefits even eligible? This article will explore the available options, but if you are considering bankruptcy, the best course of action is to call an experienced bankruptcy attorney. 

Filing for Bankruptcy While Unemployed

Losing a job is one of the primary reasons people file for bankruptcy, which makes sense since debt often becomes overwhelming when people lose their regular income. Although it may take months or years, the lack of an adequate income will eventually catch up to those who have to max out credit cards and miss payments. If unemployment lasts for too long, the financial crush becomes real. 

Can someone on unemployment file for Chapter 13 bankruptcy?

The short answer is yes; Chapter 13 is still an option for unemployed people. In this scenario, unemployment payments would be included in the standard disposable income calculation. In a Chapter 13 bankruptcy, disposable income is calculated by beginning with the income, then reducing the total by the dollar amount required to support the individual and any dependents. 

Will Unemployment Affect the Repayment Plan?

If an individual has already filed for bankruptcy and established a repayment plan when they lose their job, the following solutions may be available:

  • Continue making payments as agreed.
  • Suppose your unemployment payment is less than your monthly wages before unemployment. In that case, your plan may be modified and potentially reduced if you agree to relinquish a car or other asset in your plan. 
  • If you meet the qualifications, you may be able to get a Chapter 13 Hardship discharge.
  • You may be allowed to convert the Chapter 13 bankruptcy plan to a Chapter 7 filing. This option should only be considered with advice from an experienced bankruptcy attorney, as the terms of the new arrangement may not benefit you. For example, you might have to sell your property to pay off your remaining debts.

Unemployment complicates an already complex process, so professional representation is advised. 

Talk to a Sarasota Bankruptcy Attorney 

Bankruptcy is a viable financial solution for those who have faced unemployment, job loss, sickness, or overwhelming debt. There is no reason to feel ashamed or guilty for needing to avail yourself of this solution. In fact, hundreds of thousands of Americans have used the option to get a fresh start and live a less stress-filled life. 

If you are recently unemployed and need a financial solution, the team at the law offices of Richard V. Ellis can help you to assess your situation and explain your bankruptcy options.

Richard V. Ellis has the professional experience you need to face bankruptcy or other family law issues. His offices are based in Sarasota, Florida.