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Bankruptcy and Unemployment

Our Montgomery, Selma, and Central Alabama bankruptcy attorneys often hear people say that they can't file for a bankruptcy because they are unemployed. This is simply not true. There is no requirement that you must be employed in order to file a bankruptcy. In fact this would make little sense because job loss is one of the most common reasons that people file bankruptcy; however there is no doubt that being unemployed can still affect the outcome and success of a bankruptcy especially a Chapter 13 debt consolidation plan. The status of your unemployment will greatly affect which plan might be right for you. In other words should you file a Chapter 7 or Chapter 13 will depend in part on your employment status.

Filing a Chapter 7 bankruptcy while being unemployed is far easier than filing a Chapter 13 debt consolidation plan. A Chapter 7 is designed to eliminate all of your unsecured debts such as medical bills, credit cards, collection accounts, or old auto repossessions. A Chapter 7 is especially helpful for debtors who have a low income or have little or no assets. In a Chapter 7 bankruptcy debtors must pass a means test to qualify for the Chapter 7. The means test compares the debtor’s income to Alabama's median income for a similar household. In other words, if the debtor has four people in his household it compares that household to the median income for an Alabama family of 4. If the debtor's income is below the Alabama median income, then that debtor automatically qualifies for a Chapter 7. Most unemployed debtors have little or no income, and if they draw their unemployment benefits they are always well below Chapter 7 income limits; therefore, if the debtor is unemployed it usually makes it far easier to qualify for Chapter 7 bankruptcy. The one caveat is that most unemployed people do not have the ability to pay the court cost and fees associated with filing a Chapter 7 bankruptcy plan. If this is the case, then possibly a Chapter 13 debt consolidation is their best option.

In a Chapter 13 debt consolidation plan the debtor will pay back all, part, or none of their unsecured debts through the plan over a period of three to five years. The Chapter 13 will allow the debtor to catch up on car payments, house payments, child support, or taxes. Usually in the Chapter 13, the debtor will discharge all of his unsecured debt such as medical bills, collections, or credit cards. A Chapter 13 is a much stronger tool than a Chapter 7 because of the added benefit of being able to keep your secured debt. If you are in a Chapter 13 debt consolidation plan you are required to make monthly plan payments to the Chapter 13 Trustee. In order to have your plan confirmed by the bankruptcy judge, it is imperative that we show to the court that the debtor is able to make these regular plan payments. However, if the debtor is unemployed it may be difficult to prove to the Court that the debtor can make the payment. If the debtor is drawing his unemployment benefits or has other income in his household. then it is quite likely that we can prove to the Chapter 13 Trustee and the Court that the Chapter 13 plan payments can be made. If we can show that there is enough income coming in from other sources, then the Chapter 13 plan will likely be confirmed

Our Montgomery, Selma and Central Alabama bankruptcy attorneys tell perspective clients that the best way to determine if they would qualify for a Chapter 7 bankruptcy or Chapter 13 debt repayment plan if they are unemployed is to simply set an appointment and come in and meet with one of our local attorneys and discuss all options. We have four offices which are located in Montgomery, Selma, Greenville, and Troy. All consultations are always free, and we can usually meet with you within 24 hours. Call or text us at 334-LAWYERS (529-9377) to set an appointment. Our phone lines are answered 24 hours a day! You may also use the Contact Form on our website or email us at Remember that doing nothing changes nothing so act today!

The Sellers Law Firm is designated a debt relief agency by an Act of Congress and the President of the United States. We have proudly assisted people seeking relief under the U.S. Bankruptcy Code for four decades.

Client Reviews
Brandon was my first choice for an attorney because he is part of the community and you see him at the local store or PTA meetings and he always has time for you and answer your concerns. Ronica Phifer
The Sellers Law Firm represented me in my social security case, and later in my Chapter 7 bankruptcy. I have been very happy with all that you have done for me, and I refer people to you all the time. Thanks for all that you have done for me and my family. Angie Langford
I would like to start out by saying Brandon sellers is more than a lawyer that has helped my family out in numerous occasions but he's also a great friend to our family. Whenever he can't find a resolution for the problem he always recommends somebody that can. I've known him for years grew up together always been really good friends. I like to say in closing I'm really glad I know him I'm glad he's been able to help us when we've needed him. Thanks for everything you've done. Timothy Palmer
The sellers law firm is the best in Alabama they are friendly and very professional from the attorneys to the people in the office. They where very helpful throughout the whole process and even after it was over. So if you are in need for a bankruptcy firm give Brandon sellers a call you won't be disappointed Thank you Again Brian Floyd
I highly recommend Sellers Law Firm, they are fantastic and care about their clients. They walk you through step by step and advise you of your options. Sheila Wright