If you’re receiving unemployment benefits and considering bankruptcy, there are few things you should know.
The first is that you don’t have to be employed to file bankruptcy. In fact, one of the primary reasons people file is because they’ve lost their job.
Second, when we calculate your income to see if you qualify for a Chapter 7 bankruptcy, we have to calculate your income from all sources for the last six months. While there is some disagreement as to whether unemployment benefits should be included in this calculation, in Colorado the United State Trustee’s position is that they should be included.
The third is that in Colorado, your unemployment benefits are protected from garnishment. This means that if you have any unemployment benefits when you file, the trustee can’t force you to turn those funds over. Protecting those funds could be difficult, though, if you have deposited them in a bank account that has other funds, like your spouse’s paycheck. If you can, try to keep your unemployment benefits separate from any other funds. The best course is to make sure that you have as little money available on the day your petition is filed to avoid having the trustee ask about them at all.
One common piece of advice attorneys give to people who are recently unemployed is that they have to wait several months to file so that their employment wages fall off the income look back period if it is too high to qualify for Chapter 7. In some circumstances it might be possible to file right away by indicating that there are special circumstance that allow you to pass the Chapter 7 means test even if your last six months of income puts you over the median income for your household size. If you don’t expect to find a job soon, it might be a good idea to file right away to ensure that you qualify. If you wait until you get another job you might find yourself having to file a Chapter 13.
If you any questions about the bankruptcy process in Colorado, we hope you’ll come in to talk with an attorney for a free, no-obligation consultation. By the time your consultation is done, you should know whether bankruptcy is a good option for you and whether or not you want to work with our firm. You can schedule an appointment by using our online scheduling system or by calling 303.331.3403 to set up a time that is convenient for you.