Can I File for Bankruptcy if I am Employed?

Filing for bankruptcy allows people struggling with overwhelming debt to eliminate or restructure their debts. If you are struggling with overwhelming debt and are considering filing for bankruptcy, one question you may be asking yourself is, “Can I file for bankruptcy if I am employed?” Simply put, yes, employed people can and often do file for bankruptcy. Being employed does not disqualify you from filing for bankruptcy. However, your income will play a role in determining the type of bankruptcy you can file. Here is what you should know if you have a job and are considering filing for bankruptcy.

Does Employment Affect Your Eligibility for Bankruptcy?

It is common for people considering bankruptcy to wonder if being employed affects a person’s eligibility for bankruptcy. So, does employment affect your eligibility for bankruptcy? No, employment cannot disqualify you from filing for bankruptcy. In the United States, bankruptcy laws are designed to offer relief to individuals, whether they are employed, unemployed, or self-employed. However, whether you have an income or not will play a significant role in determining the type of bankruptcy you qualify for.

Chapter 7 Bankruptcy

The first bankruptcy option for individuals in the U.S. is Chapter 7 bankruptcy. Another name for this type of bankruptcy is “liquidation bankruptcy.” Many people prefer Chapter 7 bankruptcy because it allows debtors to discharge most unsecured debts, such as medical bills, personal loans, and credit card debts. With this type of bankruptcy, the debtor’s non-exempt assets are sold to pay off creditors, and most remaining unsecured debts are discharged.

However, to qualify for Chapter 7 bankruptcy, you must meet specific income requirements. Having too much income can disqualify you from Chapter 7 bankruptcy. A calculation called the means test will be performed to determine your eligibility. This test compares your income to the median income in your state for a household of your size. You automatically qualify for Chapter 7 bankruptcy if your household income is below the median income of a similar-sized family in your state. If it is above the median, further calculations will be performed to determine eligibility.

Chapter 13 Bankruptcy

In Chapter 13 bankruptcy, instead of selling your non-exempt property to pay off creditors, you create a repayment plan to pay back all or a portion of your debts over a few years, usually three to five. This bankruptcy type is ideal for employed people who earn too much to qualify for Chapter 7 bankruptcy but still need financial relief. In Chapter 13 bankruptcy, you don’t need to pass a means test. Your ability to repay your debts is the primary factor in determining your eligibility and the terms of your repayment plan.

However, even unemployed people may still be able to file for Chapter 13 bankruptcy. The court may consider alternative income sources like unemployment benefits, social security payments, business income, government assistance, and social security or disability insurance when determining if someone can file for Chapter 13 bankruptcy. As long as a debtor can demonstrate their ability to make payments under the repayment plan, they may qualify for Chapter 13 bankruptcy even without employment income.

Contact Our Deerfield Beach Bankruptcy Lawyer

Are you struggling with overwhelming debt and wondering if you are eligible to file for bankruptcy and, if so, which type? Let our Deerfield Beach bankruptcy lawyer at the Law Office of Adam I. Skolnik P.A. guide you. Contact us today to schedule a consultation.

Source:

uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics