Dealing with Bankruptcy Caused by Unemployment

Unfortunately, the prospect of losing your job is not uncommon. Despite being a hard worker that does what you’re asked, and even goes above and beyond, there is always a possibility of having that taken away from you.

Layoffs, sudden changes in structure, or being fired are all possibilities for why someone may lose their job. While it would be great if we lived in a world where job losses occurred far less, the sad truth is that they happen often. Sometimes they even lead to major financial strife.

When someone loses a job, they’re losing more than just that job. They’re usually losing a major source of income that is also acting as what they live on. Many people do not have the extra income to save money month to month. People who live paycheck to paycheck are some of the most vulnerable out there when it comes to job loss. A sudden change in their life can quite literally bankrupt them.

For many people in the United States, it does. When people think of bankruptcy, they always think it has something to do with negligence on the part of the person who is entering bankruptcy — clearly, they didn’t save enough money or do enough to protect their finances in case of a disaster.

In reality, in many cases, it’s just an example of bad luck happening to good people. Especially in cases of when job losses cause bankruptcy.

As we mentioned earlier, there are many people who are living paycheck to paycheck, and when you lose your job, it is suddenly way more difficult to afford your basic amenities such as:

  • Food
  • Rent/mortgage
  • Utilities
  • Car payments

Many of us enter into payment deals with the intention of having a job throughout. Rarely do you plan to lose your job. Most people who make large purchases for something like a car or house do so under the assumption that they are in a comfortable enough position of their life that they can do that, but when you suddenly lose the income to pay for those expenses, you are still stuck with them.

Don’t Take Out Unnecessary Loans

This leads to many people quickly entering debt shortly after they reach unemployment. Even when they do qualify for unemployment checks, it doesn’t always cover all the expenses — not to mention that you have to make all of this money stretch to pay for these amenities along with your bills. Grocery trips just got even more difficult if you’re trying to feed a family.

These scenarios are why so many people who lose their jobs are suddenly facing the prospect of bankruptcy. Their life is being flipped upside down without steady income, and the losses can be enormous. To prevent these losses, they try to max out their credit cards, take on loans, and find quick fixes in the hopes of finding a new job. This only pushes them further towards debt.

If you are unsure if you even qualify for bankruptcy, or if there are other methods towards escaping the debt, then we will be the first to tell you. A major part of our consultation process is seeing if you even need bankruptcy in the first place. If we discover that there are alternatives, then we may be able to work with you on ways to get your debts settled.

If we do decide that you need bankruptcy, then there are steps you will need to take afterward. Those steps include required consultations. After the required consultation meetings, we will be able to move forward with filing for bankruptcy.

Bankruptcy

If we decide that filing for bankruptcy is the best option for you, the next step will be deciding what kind of bankruptcy you can file for.

Chapter 7

If you must file Chapter 7 bankruptcy, then your debt is going to be removed from your name in exchange for the liquidation of valuable assets. This process can feel painful, but it will ensure that you are debt free after you have completed the bankruptcy process. Your life will be better off once you are free of the debt that is hounding you everywhere.

Chapter 13

If you have a certain level of income, and we can argue that you qualify for it, you may be able to file the slightly more favorable Chapter 13 bankruptcy. With Chapter 13, you will not be forced to give up any assets. You will instead have your debts rolled up into a lump sum that must be paid off monthly.