Job loss can happen to anyone at any time. Unfortunately, with Americans also carrying $986 billion of credit card debt, $11.92 trillion in mortgages, and $1.55 trillion as vehicle loans (as of 2022), job loss can easily occur while you are also struggling with debt payments. So, should you declare bankruptcy after losing your job? There are a few good reasons to do so and a few reasons to wait. Here's what you need to know about them.
The Pros of Post-Unemployment Bankruptcy
How much of a financial buffer do you have to continue managing your debt payments with no job income? Unemployment helps keep many afloat, but it doesn't cover your total income. If things will rapidly spiral downward, it's often best to be proactive and shed dischargeable debt before your finances worsen.
Looking for new work is a stressful and time-consuming process. The last thing you need is to also face foreclosure, harassment, repossession, or revocation of credit during this time. Chapter 7 bankruptcy is often a fast process, with many filers able to enter and exit it successfully in just a few months.
Finally, even those who have assets that could get them through the jobless period can protect themselves with bankruptcy. While you could drain those assets to keep up with debt payments while unemployed, should you? If they can be discharged in bankruptcy, you can keep them instead of losing them unnecessarily.
The Cons of Post-Unemployment Bankruptcy
Timing is a key issue when deciding on bankruptcy. One major factor is the lookback periods, which use historical income and expense records to determine what your average numbers are and how to calculate things like Chapter 13 payment plans. If your income prior to job loss was high, it could skew the results and cost you more assets. In that case, you may do well to wait a little longer.
If you have little income, you may not be able to file Chapter 13 while between jobs. This means you'd have to file Chapter 7, which may not permit you to keep a mortgaged home or vehicles. Waiting until you can qualify for a feasible repayment plan lets you protect those large assets in the long run.
Where Can You Learn More?
This is a big decision, and it comes at a time when you already have a lot on your plate. The best way to make the right call is to meet with a bankruptcy service in your state today. They'll help you weigh the pros and cons to find the best route forward. Call today to make an appointment.
