It would seem logical that filing for bankruptcy while unemployed would be allowed since a lack of income could make it difficult to pay debts such as credit cards and mortgages. In certain cases, it is allowed in Illinois, but not necessarily in all. Here are the distinctions to be aware of.
Can I File Chapter 7 Bankruptcy in Illinois While Unemployed?
Chapter 7 bankruptcies are designed to discharge unsecured debt. That type of debt involves accounts with no collateral for the lender to take instead of the debt and includes things like credit cards and medical debts. Illinois requires people who want to file for chapter 7 to pass a means test to prove they can’t afford to repay the unsecured debt. People with incomes below the state’s median for a similar household pass automatically. Chapter 7 is usually easily accepted in Illinois bankruptcy courts with no income.
Can I File Chapter 13 Bankruptcy in Illinois While Unemployed?
Filing for chapter 13 bankruptcy while unemployed is a bit trickier. Chapter 13 focuses on reorganizing the debt with the goal of the debtor paying it off within three to five years. It’s often used for people behind on mortgage payments, taxes, or child support. It’s a bankruptcy sought by people who want a solution that allows them to pay what they can afford and avoid foreclosure. Someone without income may have trouble getting the courts to agree to this type of filing. But it’s not impossible.
What Does It Take to Successfully File for Chapter 13 While Unemployed?
Unemployed people may have other forms of income. Those can include unemployment benefits, Social Security, or different types of income, such as alimony. If the court deems the amount of non-employment income reasonable to pay down restructured debt and the non-wage income appears steady and reliable, they will likely allow it.
Should I Hire an Attorney to Help Me File for Bankruptcy?
It might seem counterintuitive to hire an attorney to file for bankruptcy while unemployed, but there can be good reasons to do so. An experienced bankruptcy attorney will understand the ins and outs of the bankruptcy courts and will be able to advise the debtor on many aspects of debt management and bankruptcy that they may not have thought of. Bankruptcy can be highly complex, with plenty of paperwork and deadlines that must not be missed. Having an attorney to help make sure those requirements are all met can make the process go much more smoothly and end up with the right outcome for the client.
Let Us Advise You
If you or someone you know needs help filing for bankruptcy, call us at 708-575-1500 to work with one of our experienced bankruptcy attorneys.