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Bankruptcy Law Blog

Wednesday, July 17, 2019

I Filed For Bankruptcy, Then Got Fired. What Happens Now?

According to the Bureau of Labor Statistics, the average worker currently holds ten different jobs before age forty, and this number is projected to grow. Unfortunately, our bankruptcy laws weren’t written with this kind of job-hopping in mind. So, what happens when someone who has filed for bankruptcy quits their job, is fired, or is laid off?

The answer depends on the type of bankruptcy filed, and the debtor’s new financial situation. 

Chapter 7 Cases 

If the debtor who has quit or lost his or her job filed for bankruptcy under Chapter 7 of the bankruptcy code, the case will proceed as if nothing had happened. In a Chapter 7 case, most of a debtor’s assets are sold off and the profits are used to pay off debts. Remaining debts that are eligible for discharge are then forgiven. 

Since the debtor’s ability to pay his or her bills going forward doesn’t impact the current bankruptcy case, it proceeds as if nothing had happened. 

Chapter 13 Cases 

Filing for bankruptcy under Chapter 13 of the bankruptcy code is different than filing under Chapter 7. In a Chapter 13 case, the debtor enters into a 3-5 year repayment plan that helps them catch up and stay on top of their debts. At the end of the repayment plan period, most remaining debts are forgiven. 

People often file under Chapter 13 because they want to hold on to their house and/or their cars rather than sell them off. But some people are forced to file for Chapter 13 when they would rather file for Chapter 7 because Chapter 7 is reserved for people the court determines will never be able to afford to repay their debts. This ability to pay becomes important when the debtor quits, changes, or loses their job while going through the years-long Chapter 13 process. 

If a Chapter 13 filer has a change in employment, and it impacts his or her ability to make payments towards their Chapter 13 repayment plan, he or she should immediately contact an attorney and tell the court what is going on. 

It may be possible to adjust the repayment plan so the debtor can continue to make payments and complete the Chapter 13 process. The new plan will have lower payments, which ends up paying the creditors less than they would have otherwise gotten, but from their point of view something is better than nothing. 

If holding on to a house, car, or other big-ticket item isn’t important to the debtor, it may make sense to convert the Chapter 13 case into a Chapter 7 case. A conversion may also be necessary if it is impossible for the debtor to stick with any sort of repayment plan. This significantly shortens the bankruptcy timeline and results in more debt being forgiven. 

Don’t wait, contact a Mobile bankruptcy attorney right away. 

Quitting, losing, or changing or changing jobs can be stressful. It can take up a lot of your mental and emotional energy. But if you make a job change while going through bankruptcy, you need to make talking to your attorney a priority. 

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Padgett and Robertson assist clients with Bankruptcy, Personal Bankruptcy, Consumer Bankruptcy, Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and The New Bankruptcy Law in Mobile, Alabama and throughout southern Alabama. Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”



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Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”