Being Unemployed May Count You Out Of Chapter 13
You might be looking to file a Chapter 13 over Chapter 7 in hopes of catching up on asecured debt for something you want to keep, like your house or your car. With a Chapter 13 bankruptcy, the main thing you need to prove is that you can make the payments to complete your plan. If you file bankruptcy with no income, then there is no source of money you can pay. Even if you are receiving unemployment income, this income will only help if the amount you get is enough to cover the payments in your plan, in addition to your regular monthly living expenses, which is pretty unlikely. For most people, being unemployed takes the Chapter 13 option off the table.
Unemployment And Bankruptcy: What You Need To Know
Since COVID-19 has made its way into America, the Ohio Department of Job and Family Services has paid out nearly $32 million to 105,000 claimants of unemployment. In one week, the state had more than 185,000 files for unemployment. With the novel coronavirus still wreaking havoc across the nation, theres no way to know when many Americans will get back to work. This is obviously a large problem for the total economy. But what happens if you are someone who has been laid off because of COVID-19 and you were also filing for bankruptcy?
Contact Faro & Crowder Pa To Learn About Your Bankruptcy Options In Brevard County Fl
If you have questions about filing for bankruptcy protection, we have the answers. to schedule your initial consultation. Our office is located in Melbourne, but we proudly serve individuals, families and businesses across the State of Florida. We also offer free initial consultations for foreclosure defense and defense against debt collection.
The information on this blog or any blog is not intended as, and should not be taken as, legal advice.
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Will My Overpayment Of Unemployment Be Covered Under Chapter 7 Or 13
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What Impact Will My Employment Status Have On My Bankruptcy Case
Because your disposable income must be low enough to pass the means test to qualify to file a Chapter 7, being unemployed can make you more likely to be eligible.
When you are unemployed, you presumably have little to no income. Without sufficient income, you will be unable to pay back your debts.
If you have a no-asset case, you will be entitled to a fresh start under Chapter 7 bankruptcy laws. This means that other than potentially having to pay to file your Chapter 7 petition, you will not have to pay your unsecured creditors.
How does my employment status impact my Chapter 13 case?
Because Chapter 13 requires you to make monthly payments to repay all or a percentage of your debt, not being employed can make it very difficult if not impossible for your Chapter 13 case to succeed.
Chapter 13 cases are most effective for people with regular employment income. Nonetheless, being employed is not a requirement.
As long as you have income from other verifiable sources sufficient to afford your monthly payment, your Chapter 13 case will be approved even if you are unemployed. If not, your Chapter 13 case will get dismissed.
Your income will play a factor in how much your monthly Chapter 13 payment will be. Verifiable sources of income can be from social security, unemployment, or outside contributions.
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Overpayment Of Government Benefits
Receiving demand letters from a government agency for overpayment of benefits & penalties? We can eliminate or consolidate your debt to improve your credit.
What is happens if you are paid unemployment compensation only to later have the claim overturned? What if you received workers compensation until your employer fought it and won? If you are now getting demand letters for Social Security Administration, Unemployment Agency or other government entity regarding overpayment of benefits, we are here to help.
Besides filing an appeal to plead your case in front of a judge, the only legal way to resolve debts resulting from overpayment of government benefits is to file a personal bankruptcy. While this may seem daunting, you may be surprised to learn the many benefits to your budget and credit that this options offers.
Our firm specializes in helping Michigan residents find lasting debt relief and financial peace-of-mind. Call us today at 866-261-8282 for a free consultation to understand how to bring swift resolution to government demand letters and other debts that may be impeding your budget and credit. We have seven Michigan office locations, conveniently located in: Detroit, Southfield, Warren, Dearborn, Ann Arbor, Lansing and Flint.
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Filing Bankruptcy With No Money While Being Unemployed Is An Option
As discussed above, filing Chapter 7 while unemployed is an option and is not an unusual occurrence. Bankruptcy exists to help everyday people with debt relief when they need it the most. While it is possible to file bankruptcy with no money, you should be careful about when to file based on your particular circumstances. If you are not certain what timing is best, you can always consult a bankruptcy attorney or partner with a nonprofit like Upsolve for assistance.
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Chapter 13 During Georgia Unemployment
You may file for Chapter 13 bankruptcy if you are unemployed. But if you do not have any employment income, youll need to demonstrate you have some other form of income from a verifiable source that will allow you to afford the payments you schedule in your repayment plan. This could include unemployment benefits, Social Security Disability benefits or retirement benefits. Youll need to show the court you will be able to live up to your obligations in your repayment plan.
What Should You Know About Bankruptcy And Unemployment
So, aside from these general rules about bankruptcy and unemployment, what should you know?
There are a few factors that influence your bankruptcy case when youre unemployed, including:
- Length of unemployment
- Earnings at your previous job
- Prospects of finding a job in the near future
- Other sources of income
These factors play a role in whether or not you will pass the means test. As mentioned earlier, if you were recently a high-income earner, chances are you wont qualify for Chapter 7.
No bankruptcy court is going to look at someone who was recently earning a great deal of money and just discharge their debts. The court assesses your average income over the past six months. If it includes high wages, its going to hurt your chances of qualifying. The means test is one of the tools used to determine if you qualify for Chapter 7 or Chapter 13.
The best thing you can do if you want to file for Chapter 7 but your recent income disqualifies you is to wait. About six months from now, if you dont find another job, youre likely to qualify for debt discharge.
If you cant wait or you know youll find a job within the next six months that will disqualify you, your best option is to file for Chapter 13. The problem youll encounter is that Chapter 13 requires you show an ability to meet payment obligations. You must have some type of income to qualify for Chapter 13.
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Understanding Chapter 7 Bankruptcy
Chapter 7 bankruptcy is ideal for low-income filers who have little or no assets. It quickly relieves heavy financial burdens by eliminating unsecured debts, such as medical bills, credit cards, cash advances, and unsecured loans. It is possible to keep assets associated with secured loans like a house or car in Chapter 7, but it requires that you continue making regular monthly payments in most cases.
Keep in mind that you wont lose everything in a Chapter 7 bankruptcy as you are entitled to keep exempt property. However, your nonexempt property may be repossessed or sold so that the proceeds can go towards repaying creditors. Most individuals are able to protect all their property with their exemptions. On average, a Chapter 7 bankruptcy takes three to four months to complete.
Can I Discharge An Unemployment Overpayment In Bankruptcy
Your unemployment benefits might not be enough to pay for housing, insurance, groceries, and other expenses. Now, to make matters worse, youve received a letter telling you the state overpaid you and wants its money back.
The COVID-19 pandemic forced many people out of work for months, causing tremendous financial hardship. If you are in debt and considering bankruptcy, please keep reading to find out if you can discharge unemployment overpayments.
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Becoming Unemployed When Filing For Chapter 13 Bankruptcy
Chapter 13 requires you to repay debts over a period of 3-5 years, while offering you various tools such as lien stripping or cram-downs of certain loans. It is very difficult to stick to a repayment plan if you are unemployed, even if you are collecting unemployment benefits. In most cases, you should not file for Chapter 13 bankruptcy if you become unemployed. However, your plan may be approved if you can show you have sufficient income from another source, such as rental income or sale of a property, to fund the debt repayment plan.
If you become unemployed after filing for Chapter 13 bankruptcy, you may need to stop making payments. In that case, the court will likely dismiss your case. You will not receive a discharge because you did not complete your plan. Moreover, you will not be able to strip junior liens or use a cram down. However, you may qualify to file Chapter 7 bankruptcy at that point, which takes much less time to complete than Chapter 13. If you do get a job again, and your case has not already been dismissed, you may be able to get back on track with payments. The trustee or court will likely require you to provide documentation that you can afford the plan after all.
How Is A Chapter 7 Bankruptcy Different From A Chapter 13 Bankruptcy
A Chapter 7 bankruptcy works differently than a Chapter 13 bankruptcy. A Chapter 7 bankruptcy is often referred to as a âfresh startâ bankruptcy or a âliquidationâ bankruptcy.
This is because non-exempt assets get liquidated by the Trustee assigned to your case. In a Chapter 7, your Trustee sells your non-exempt assets and the proceeds go toward repaying your debts.
In many cases, people who file for Chapter 7 bankruptcy do not have assets that the Trustee can liquidate. If you have no assets to liquidate, a Chapter 7 gives you the benefit of a fresh start free from debt.
Chapter 7 bankruptcy laws are designed to help low-income or unemployed individuals get out of debt and reclaim their financial freedom without having to pay back what they owe to unsecured creditors.
How a Chapter 13 Works:
In comparison to a Chapter 7 bankruptcy, a Chapter 13 bankruptcy requires you to repay at least a portion of what you owe to your creditors. You will be required to make monthly payments for a period of 3-5 years.
Your Trustee is responsible for distributing your payments to your creditors until the end of your Chapter 13 case, when the bankruptcy judge signs your discharge order and your case is closed.
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How Do I Take The Chapter 7 Means Test
The Chapter 7 Means Test is comprised of the following bankruptcy forms: 1) Chapter 7 Statement of Your Current Monthly Income 2) Statement of Exemption from Presumption of Abuse Under §707 3) Chapter 7 Means Test Calculation. Many people only need to take the first form, but we will walk you through everything to make sure its clear as it took us a long time to figure this out. First, you should know what your income is in bankruptcy terms. You have information about it above, but you may want to take the following calculator first to help.
Filing For Chapter 13 Bankruptcy When Unemployed
Chapter 13 bankruptcy requires a repayment plan that pays back part of your debt. The advantage is you will have more time to pay back debt and keep secured debts, like your home mortgage or car loan. However, it can be difficult to prove you have the money to make these monthly payments if you do not have a job.
Unemployment benefits can provide some monthly income, but most of this is needed for bills and rent or mortgages. Suppose you have enough unemployment income or rental income to cover your current bills and pay back the repayment plan. In that case, you may qualify for Chapter 13, but this is rare.
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What If I Didnt Qualify For Unemployment Benefits Because Im Self
The CARES Act created Pandemic Unemployment Assistance to provide emergency unemployment assistance to the self-employed or workers whose benefits have been exhausted. Up to 39 weeks of benefits are available immediately to the self-employed, including independent contractors, freelancers, workers seeking part-time work, and workers with too short a work history to qualify for state unemployment benefits. The benefit is $600 per week, plus 50% of the average income from the previous years highest quarterly income .
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Fraudulently Obtained Unemployment Benefits Are Not Dischargeable In Bankruptcy
State unemployment benefits are paid pursuant to a system that relies on trust. Benefits are paid based on representations made by claimants that they are out of work and that they continue to seek out full-time work. If a claimant finds part-time work, then benefits are reduced accordingly.
A recent opinion from the United States Bankruptcy Court for the Western District of Michigan addresses a Chapter 7 debtors attempt to discharge a debt owed to the State of Michigan for overpaid unemployment benefits, and penalties and interest stemming from the overpayment.
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Does A Regular Paycheck Disqualify A Consumer From Filing For Chapter 7 Bankruptcy
If youve been researching your bankruptcy options, youve likely heard of the means test.
Indeed, much has been written about the means test, the vaunted gatekeeper to chapter 7 bankruptcy protection implemented by Congress as part of BAPCPA in 2005.
Under that law, families that earn above the median income in their state must pass the means test in order to qualify for chapter 7 bankruptcy.
Does this mean you cant file for bankruptcy if you have a job?
No, it does not.
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Can You File Bankruptcy On Unemployment Overpayment
Some newly unemployed individuals are surprised to receive notices from the state that they have been overpaid in unemployment benefits and must repay the money they received. It doesnt happen all the time of course, but it happens enough for it to be an issue of concern.
So what do you do when the state demands that you repay part of your unemployment payments received maybe months earlier?
Its important to note that if you received an overpayment of unemployment benefits because of fraud, you will receive no protection under the bankruptcy code.
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It Is Possible To File For Chapter 7 Protection While Earning A Salary
Will a new job give you a failing grade on the means test and prevent you from filing chapter 7 bankruptcy?
Likely, no.
First of all earning a salary doesnt automatically preclude anyone from qualifying for chapter 7. Only individuals and families that earn more than the average in their states must pass the means test in order to qualify and often do. A job at a professional services firm, Like J.P. Morgan, that pays a higher salary, will make the path to bankruptcy harder than a job at Walmart that doesnt pay as much. However, keep in mind that the income guidelines for chapter 7 look backwards.
