What if I Lose My Job During Bankrupty?

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If you lose your job while in an active Chapter 7 bankruptcy or Chapter 13 bankruptcy, it may impact bankruptcy filing.  If you are able to obtain unemployment benefits, you may be able to continue to meet your financial obligations.  However, the impact of the loss of employment on each type of bankruptcy will vary.

Chapter 7 Bankruptcy

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If you are in a Chapter 7 bankruptcy, the loss of a job may impact your ability to pay for a home, an automobile, or other assets.  If you are concerned about your ability to continue to pay these debts, you should speak with your attorney about options available to you including surrendering or giving up the assets in your bankruptcy.  The last thing you want to happen after completing a Chapter 7 bankruptcy is to have a repossession of an auto or the foreclosure of your home listed on your credit.  Often, the auto finance company and the mortgage company will look for you to pay any deficiency balance, the difference between what you owe on the asset and what they sell it for at auction, after the sale of the auto or home. Again, the purpose of the Chapter 7 was to eliminate your debts and give you a fresh start, so a foreclosure or repossession and a deficiency balance is the last thing you need.

Chapter 13 Bankruptcy

If you are in a Chapter 13 bankruptcy, the loss of a job will most likely impact your ability to make payments to the Chapter 13 Trustee.  As a result, you should contact your attorney to see if a modification of the Chapter 13 is possible.  In some cases, the amount paid to unsecured creditors, including credit cards, medical bills, personal loans, etc., can be reduced.  However, this is not always possible.  In that case, you may need to consider whether it is in your best interest to surrender or give up an asset in the Chapter 13 bankruptcy.  For example, some clients choose to surrender a car in their bankruptcy in order to afford the Chapter 13 payments and retain their home.  In other cases, the Chapter 13, regardless of the modifications, is no longer feasible.  In that situation, you should speak with your attorney to determine if converting to a Chapter 7 bankruptcy is an option for you.  By converting to a Chapter 7 bankruptcy, you would be able to eliminate your responsibility for the majority of your debts.   Again, you should speak with your attorney to determine the best option for your situation.