I just lost my job and need bankruptcy. Should I file now or wait?

In many situations, it makes sense to wait to file for bankruptcy if you've just lost your job.


I just lost my job. I am making purchases and taking cash advances on my credit card to get by, but pretty soon I am going to max out. Should I file for Chapter 7 bankruptcy now or wait?


Waiting to file might be necessary to pass the means test -- you must pass the means test in order to qualify for Chapter 7 bankruptcy. Waiting to file might also be necessary in order for you to wipe out the credit card debt that you are incurring to stay afloat while you are unemployed.

It Might Be Easier to Qualify for Chapter 7 Bankruptcy

In order to qualify for Chapter 7 bankruptcy, you must pass something called the means test. The means test looks at your income for six months before your filing date, allows you to deduct certain expenses, and then determines if you can pay back a certain percentage of your debts. If you don't pass the means test, you cannot file for Chapter 7 bankruptcy. (Get details on how this works in  The Chapter 7 Bankruptcy Means Test.)

The lower your income, the easier it is to pass the means test. If your income before you lost your job was greater than the median income in your state (see  Chapter 7 Means Test: Comparing Your Income to the State Median Income) and you don't have a lot of expenses, you might not pass the means test if you file bankruptcy right away. However, by waiting a few months, your average income over the six months prior to your filing date will decrease (a few or more months of zero income or unemployment income will bring down your six-month average). This might make it easier to pass the means test.

You Might Be Able to Wipe Out More Debt From Credit Card Purchases

If you are using credit card purchases to get by, you should wait to file. This is because you can only wipe out debt that you took on before your filing date, so by waiting you can wipe out the purchases you make to survive while you are unemployed.

You Might Be Able to Wipe Out More Cash Advances

Waiting to file will also make it possible to wipe out the cash advances that you are taking out on your credit card while you are unemployed. This is because cash advances from a single credit card exceeding $925 taken within 70 days of your filing cannot be erased. To get around this, simply wait until 70 days have passed before you file. To learn more, see  What is an Objection to Discharge in Bankruptcy?

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