Should I File For Bankruptcy Because of Prolonged Unemployment?
Unemployment something we all have to face. Some go through very long periods of unemployment because they are stuck in a depressed jobs area, are in their middle age years, have a skill that was mostly outsourced overseas, or need to retrain and enter a new line of work. For these people, debt problems hit hard and there is really nothing they can do about it except keep looking for gainful employment. Yet even in the case of prolonged unemployment, bankruptcy should not be sought as a debt solution. Here’s why:
It could be that you are judgment proof by this time. With prolonged unemployment, it could be that you have already lost your home due to foreclosure and your car is so depreciated that it falls under the exempt amount for your state. So there would be no need to have a Chapter 13 Bankruptcy to protect your home. In other words, ask yourself what assets you have left after being without a job for so long. By this time, the original creditors on your credit cards have either written off the debt/sold it to a collection agency or they have filed a law suit against you. We are referring to unemployment that has lasted longer than 180 days which is usually the aging period for credit card companies to write off bad debt. If someone has filed a lawsuit against you then you know about it by now. However if you have no assets and income, the judge will more than likely declare you judgment proof. Filing bankruptcy does not make much sense because a Chapter 7 liquidation bankruptcy would be of little effect due to no assets and your income would not be high enough for a Chapter 13.
There is less likelihood of you being sued if you are still unemployed and creditors determine you have no assets. Although don’t be surprised if your creditors don’t believe you. They are trained not to believe you. But their unbelief as to your employment condition is irrelevant and you should not run to file bankruptcy just to get them to believe you. You know the truth as to your employment status. Just state the truth to them and if you are not comfortable discussing it any further then politely tell them you have to hang up this call. They have also recorded your phone conversation and you can be certain that it will be used as input to a decision whether or not to sue you in court. Remember that suing you is one thing and collecting is another. They may forego the expense of taking you to court if they deem there is little chance to recover anything.
Bankruptcy proceedings and time wasters can hinder your job search. Everyone who has had to do an extensive job search knows that you have to treat a job search like a job. You basically spend the majority of your day looking for work. However while you are trying to find work and go through a bankruptcy, you are spending a day here and there at your lawyer’s office, the courthouse, or in a boring meeting with your creditors. Time is money as they say.
If you now have a job, a debt management company can now talk to your creditors. If you just became employed and have not filed for bankruptcy then it’s even better. Now, with the regular job, you can either use the services of a debt management company or you can call your creditors and try to work out some type of payment or settlement plan. Because your income is restored, you now have some negotiating power instead of filing for bankruptcy.