Can You File for Bankruptcy While Unemployed?

Qualifying for bankruptcy has nothing to do with your job status. Many Americans live paycheck to paycheck, and going a couple of weeks or months without a job can cause severe financial distress for some families.

You can file for bankruptcy if you’re unemployed. Having little to no income would only increase your chances of qualifying for a Chapter 7 bankruptcy. When it comes to Chapter 13 bankruptcy, a bankruptcy court will rarely approve a repayment plan without regular income.

This article explains what’s involved in filing for bankruptcy while unemployed. It also examines how being out of work can affect your bankruptcy case and if your unemployment benefits come into play.

If you’re out of work and are considering filing for bankruptcy, consider contacting a local bankruptcy attorney before filing anything with the court. While the bankruptcy process can be straightforward for some debtors, these cases can become complex rather quickly. An experienced bankruptcy lawyer will make sure you file your petition correctly and will work hard to help you decide how best to proceed.

What Type of Bankruptcy Should You File if You’re Unemployed?

There are two main types of personal bankruptcies: Chapter 7 and Chapter 13. Chapter 7 is ideal for people looking to eliminate their debt and get a fresh start. Chapter 13 is designed for people who want to keep their assets and restructure their debt.

If you aren’t working, the odds of qualifying for a Chapter 13 bankruptcy are slim. To file Chapter 13 bankruptcy, you must prove that you have sufficient regular income to make monthly payments under your plan. That’s difficult without steady income, unless you’re filing a joint petition with your employed spouse.

For Chapter 7 bankruptcy, being unemployed may make it easier to qualify. One of the requirements of filing a Chapter 7 bankruptcy case is that you earn less than your state’s median household income. You’ll qualify by default if you have no income, assuming that you aren’t filing bankruptcy with a spouse who is earning a significant amount of money.

Filing for Chapter 7 Bankruptcy While Unemployed

You’re likely to qualify for Chapter 7 bankruptcy if you’re unemployed. With no other incoming money beyond unemployment benefits, your monthly income will fall below your state’s median household income.

If you’ve been out of work for five or six months, your income may appear to be zero. This depends on whether you received unemployment compensation during the six-month “current monthly income” lookback period. Unemployment benefits are often included in current monthly income under the Bankruptcy Code. If you’re uncertain about this, check with a bankruptcy lawyer before you make plans to file.

Even if your state includes your unemployment benefits as income for purposes of the Chapter 7 “means test,” there’s a good chance that you’ll still qualify for Chapter 7. The means test is based on your state’s median income level.

Even if you fail the means test, you may still qualify for Chapter 7 bankruptcy. A bankruptcy trustee examines your disposable income and measures it using IRS standardized expense allowances to determine if a presumption of abuse arises. If there is no abuse, then you will likely qualify for bankruptcy. The bankruptcy court calculates your disposable income by taking your current monthly income over the previous six months preceding the filing date and subtracting all allowable expenses.

Qualifying for Chapter 13 Bankruptcy While Unemployed

Unlike Chapter 7, a Chapter 13 bankruptcy requires that you earn enough money to make monthly payments for the duration of your Chapter 13 plan. If you’re unemployed, the court may determine that you don’t have sufficient regular income to commit to a reasonable payment plan. The U.S. Bankruptcy Code defines regular income as a reliable, recurring source of income, which the court often doesn’t consider unemployment benefits to be.

For this reason alone, you probably won’t qualify for Chapter 13 bankruptcy. Even if you can prove that you have sufficient regular income to make your monthly payments, you must still meet the other eligibility requirement for a Chapter 13 bankruptcy. According to federal bankruptcy laws, your total secured and unsecured debt must fall below a specific amount to qualify for a reorganization bankruptcy.

The maximum limits for your outstanding debt as of 2026 are as follows:

• Unsecured debt: $526,700. Unsecured debt includes any financial obligation that is not tied to collateral. Some of the most common types of unsecured debt include medical bills, credit card debt, and personal loans.
• Secured debt: $1,580,125. Unlike unsecured debt, secured debt includes any loan or other agreement tied to physical collateral. For example, your mortgage and car loan would qualify as secured debt.

A local bankruptcy attorney can help you determine which chapter of bankruptcy is the best solution for your financial situation.

Timing Considerations for Your Bankruptcy Filing

A job loss can be demoralizing and add to stress you may already have from trying to pay your bills. It can sound tempting to file Chapter 7 bankruptcy, but it’s important to be aware of the potential negative repercussions as well.

While you may be able to survive on a limited income for a few weeks or months, it’s difficult to maintain. Without a lot of money in savings, it may be hard to pay your credit card balances while you’re unemployed. You may even find yourself facing foreclosure.

If you’re feeling overwhelmed, consider speaking with a bankruptcy attorney. Filing bankruptcy will trigger something called an automatic stay, which prohibits your creditors from pursuing collection action against you during your bankruptcy proceedings. Still, rushing into a Chapter 7 case immediately after losing your job may be risky. When the trustee looks to see if you pass the means test, they’ll examine your income for the six months preceding your bankruptcy filing. If you file your petition within days or weeks of losing your job, you may not pass the means test.

Some unemployed people earned a good living before they lost their job, which means their most recent six months’ household income will fall above the threshold. If this is the case for you, you may need to wait before filing.

What Happens if You Get a New Job Immediately After Filing Bankruptcy?

Regardless of whether you choose to file bankruptcy, finding a new job is going to be a primary goal. Depending on how much you’ll earn in a new position, your household income may no longer fall below your state’s median income. While the bankruptcy judge won’t automatically dismiss your Chapter 7 bankruptcy case if you get a new job, they may not issue your discharge if you deliberately concealed known upcoming employment before filing for bankruptcy.

After the “Meeting of Creditors,” the trustee may approve your bankruptcy and recommend that the judge issue a discharge of your debts. Once this happens, you no longer owe the debts you included in your bankruptcy. You’ll still have to pay any non-dischargeable debts, such as student loans, child support, and alimony.

Unemployed? Contact a Bankruptcy Lawyer for a Fresh Start

If you lose your job, you may find yourself in a precarious financial position. Without a steady income, you may have no choice but to consider filing for bankruptcy.

It can be difficult to navigate the bankruptcy courts, even if you’ve been through the process before. You owe it to yourself to contact an experienced bankruptcy attorney who knows the U.S. Bankruptcy Code and can provide you with sound legal advice about bankruptcy exemptions, nonexempt property, and much more.

Having a bankruptcy lawyer can mean the difference between receiving a bankruptcy discharge and being told that your case is being dismissed. Schedule a free, initial consultation with a legal professional who can help you on the path to rebuild your credit.