Filing for bankruptcy may allow you to achieve a greater level of financial stability while unemployed. If you pass the means test, you may be able to pursue a Chapter 7 bankruptcy. This generally allows you to eliminate secured debts while retaining the equity in your Tennessee home, a car or other assets. In most cases, unemployment benefits do not count as income for purposes of determining if you qualify for a liquidation bankruptcy.
Creditors typically won’t get any portion of an unemployment check
As a general rule, a bankruptcy court will not seize your unemployment benefits to pay your creditors. However, there is a chance that these funds could be seized if you commingle them with other accounts. For example, if you deposit a check into a bank account that a creditor is allowed to take possession of, you may lose any funds inside of that account regardless of its original source.
It may be difficult to file for Chapter 13 protection while unemployed
To qualify for a Chapter 13 proceeding, you must show evidence that you can make plan payments. Typically, payments are made from wages earned from your employer. In some cases, it may be possible to convince a judge to allow you to make plan payments with benefits received from the government.
It may also be possible to use rental income, money made from the sale of stocks or other sources of money to make plan payments. An attorney who is familiar with bankruptcy law may be able to assist in the process of helping you qualify for Chapter 13 protection while you are unemployed.
If you are struggling to pay your bills, it may be a good idea to consider filing for bankruptcy. An attorney may be able to explain the potential benefits of doing so such as the ability to eliminate debts in a matter of months or obtaining an automatic stay. The automatic stay prohibits creditors from seizing property, filing lawsuits or taking other actions in an effort to collect an unpaid balance.