Can I File Chapter 13 Bankruptcy If I Am Unemployed?

You don’t have to be employed to file Chapter 13 bankruptcy. However, you do need a steady source of income to be able to fund the chapter 13 plan. This income could be Social Security, disability, rental income, investment income, unemployment benefits and other sources of income such as family assistance. There is a misconception out there that you have to be employed to be able to file a chapter 13 bankruptcy. This is simply not true. In fact, I have had many cases confirmed where the person had no income from a job but was only receiving Social Security, unemployment, or other types of benefits.

Obviously the success of your chapter 13 case depends upon you making regular, timely payments to a chapter 13 trustee over the course of your plan. You have a greater likelihood of success if you are employed however many clients have succeeded based on Social Security, unemployment, disability and other sources of income. If you are employed, you can have the amount required for your chapter 13 monthly payment deducted directly out of your pay in what is known as a payroll control order. This can be done on any person who is working for wages. If you are self-employed, then you will have to make the chapter 13 trustee payment directly on your own.

Many people have filed chapter 13 when they were unemployed and then later became employed. This is a great way to stop a home from going into foreclosure, from wages being garnishment at the rate of 15% of your pay, or to stop your bank account from being attached. By filing when you’re unemployed as long as you are receiving some sort of income, you are able to start the process and stop the collection activity. During this time, if you’re looking for employment and you become employed, then your chapter 13 monthly plan payment may increase based upon your additional income. However, this is what you really want to see and that is a successful chapter 13 which requires payments to a trustee. The amount you pay per month is based on your income and your expenses. Thus, when you become employed and start earning more money per month, the trustee is going to require additional amounts to go towards your creditors.

For more help with chapter 13 information and to see if you qualify, you can contact the office at 847-520-8100. The initial consultation is always complementary and we will put together a plan that will work for you based upon your budget.

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