Bankruptcy and Unemployment: What to Know
Financial difficulties and plans to file for personal bankruptcy often go hand in hand. For many residents of South Florida, financial struggles begin or are exacerbated by a job loss. In some cases, debtors are unable to find another job, and financial difficulties worsen. Even when debtors are able to find new employment, they may not be earning the same wages they were previously, and it may be difficult or even impossible to catch up with creditors without considering a bankruptcy filing.
There are various aspects of unemployment that can impact bankruptcy cases, so it is important to consider the specific details of your case with one of the West Palm Beach bankruptcy attorneys at our firm. In the meantime, we can tell you more about the general relationship between unemployment and bankruptcy in Florida.
Unemployment Can Impact Eligibility for Chapter 13 Bankruptcy
If you are currently unemployed, you will most likely be considering a Chapter 7 bankruptcy filing, which is a liquidation bankruptcy. Unless debtors were particularly high earners before becoming unemployed, or have only become unemployed very recently, they will often be eligible for Chapter 7 bankruptcy and will pass the “means test” during unemployment, even if they are receiving unemployment benefits. A lawyer can discuss your past and current income with you in relation to the means test.
However, unemployment can impact your ability to file for Chapter 13 bankruptcy or another type of reorganization bankruptcy. Many debtors want to file for Chapter 13 bankruptcy (rather than Chapter 7) if they are facing foreclosure since Chapter 13 bankruptcy can stop a foreclosure and allow the debtor to keep their home. Yet in order to have a Chapter 13 repayment plan confirmed, you must be a “wage earner” who has the ability to make monthly payments on the plan. Being unemployed can make it more difficult to file for Chapter 13 bankruptcy successfully, although it may be possible to do so if you are receiving unemployment benefits.
How Unemployment Benefits Are Treated in Bankruptcy Cases
Next, you are likely wondering about the status of unemployment benefits, especially if you are planning to file for Chapter 7 bankruptcy. Under Florida law, unemployment benefits are exempt, which means they cannot be liquidated in a Chapter 7 case. In short, you will be able to keep your unemployment benefits. The only exception is if you currently owe child support payments that you have not paid.
At the same time, it is important to keep in mind that unemployment benefits can be considered when evaluating your eligibility for Chapter 7 bankruptcy and your ability to pass the means test.
Contact a West Palm Beach Bankruptcy Attorney Today
If you are considering bankruptcy and are currently receiving any type of unemployment pay or other types of public or private benefits, it is important to seek legal advice. One of the experienced West Palm Beach bankruptcy lawyers at Kelley, Fulton, Kaplan & Eller can explain the relationship between bankruptcy and unemployment and we can also help you to understand how other assets may or may not be impacted by a bankruptcy filing. To learn more and to get started on your bankruptcy case, contact us today.
Sources:
law.cornell.edu/uscode/text/11
flsenate.gov/Laws/Statutes/2022/Chapter222/All
leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0400-0499/0443/Sections/0443.051.html