Unemployment and Underemployment as Causes of Bankruptcy

Most people enjoy being able to work and earn money that allows us to purchase the things we need and the things we want. However, we can find ourselves either unemployed or underemployed in different times in our lives and that can play havoc with your intended financial situation. Reductions in income can be a tough nut to crack, but there are often resources out there that may be able to help. One of the primary purposes of the bankruptcy laws are to allow a person to get a “fresh start” in their financial situation. The purpose of the fresh start is just what it sounds like. A Chapter 7 or Chapter 13 bankruptcy can often offer a reset for your financial difficulties. If you have lost your job or find yourself with employment that doesn’t allow you the ability to buy what you need to live, then you may want to consult with an experienced bankruptcy attorney such as the Montgomery, Selma, and Central Alabama bankruptcy attorneys at The Sellers Law Firm.

In some ways a reduced income may make it easier to obtain a fresh start with your financial problems. One example of this is the “means test” in bankruptcy. The means test determines if you can file a Chapter 7 personal bankruptcy or must file a Chapter 13 bankruptcy.

A Chapter 7 bankruptcy is often called a liquidation bankruptcy. This means that you have the ability, under a Chapter 7, to surrender items such as cars, boats, or furniture that secure your debt to the lenders. Then you ask that any amount left owing to the secured creditor be discharged the same as your unsecured debts like credit cards and signature loans. This does not mean that you always must surrender the items, if you can continue to make the payments for the items then you can enter into an agreement to keep the items and go on to make the payments. A Chapter 7 bankruptcy is especially favorable when you are unemployed because it will allow you to walk away from credit card debt, medical bills, and unsecured personal loans at a time when your income will not force you to file a Chapter 13 bankruptcy. Remember, that we are here to help you! Contact us now by phone or text at 334-LAWYERS (529-9377)! Waiting to take action can be make your financial situation even worse.

The Chapter 13 is a reorganization of your debt in some fashion. I often describe a Chapter 13 to be like a consolidation loan. In a normal consolidation loan, you go to a lender to borrow enough money to pay off some or all of your creditors. Under a Chapter 13 individual bankruptcy you propose a plan to the Court about what you are going to do with your debts. These plans are based on certain bankruptcy rules which includes the ability to make a monthly payment for some of your debt. This can be a problem if you need to file a Chapter 13 in order to pay for a secured debt such as a car in your plan and you are unemployed. A Chapter 13 plan where you do pay some of your unsecured debt also will stop continued interest, penalties, and late fees on these unsecured debts that are being paid in the bankruptcy. We at The Sellers Law Firm, your Montgomery, Selma, and Central Alabama bankruptcy attorneys, will be able to help you develop the necessary Chapter 13 plan if that is what is needed to help you get the fresh start in bankruptcy.

The means test is based upon your last 6 months income and the number of family members or dependents in your household. If you have had a reduction in your income, then you may pass the means test and be able to file a Chapter 7 which can be more helpful in some situations. If your income exceeds the means test amount, then you may have to file a Chapter 13 and be required to pay some funds back to your unsecured creditors. So, the loss of a job or reduction in income may be helpful in allowing you more options if you attempt to get a fresh start through bankruptcy. As always, the decision to file for bankruptcy protection is a complicated one and discussing it with Montgomery, Selma, and Central Alabama bankruptcy attorneys at The Sellers Law Firm is a good first step.

We are here to help you! We have four convenient locations in Montgomery, Selma, Greenville, and Troy. Our phone lines are answered 24 hours a day, and we can usually meet with you within 24 hours of contacting us or even sooner in case of emergencies. All consultations are free; however, we consider what we do to not be a consultation, but a strategy session where we instantly go to work to find a solution to your financial issues! Call or text us today at 334-LAWYERS (529-9377), or you can use the Contact Form on our website. You may also contact us at bsellers@sellerslawfirm.com. Take control of your debts and creditors before the creditors and debts take control of you! Doing nothing changes nothing so contact us NOW!