Filing for Bankruptcy After a Job Loss

Consulting firm Challenger, Gray & Christmas reported that employers announced 153,074 job cuts in October of 2025. That’s a 175% rise from the 55,597 cuts announced just a year ago in October of 2024.

The industries experiencing the most cuts were tech, retail, warehousing, and the service sector. This doesn’t mean that others haven’t been hard hit as well. You might be one of them.

So, if you’re facing the financial difficulties that come with this hardship, there are options for filing for bankruptcy after a job loss. In some cases, you could do this on your own. But far more often than not, you’ll want to seek counsel with Micihgan bankruptcy attorneys who can help you get on the right path.

The Negative Impacts of Job Loss

Dealing with the sudden loss of income is a challenge, to say the least. And even if you’re receiving unemployment benefits, they’re often just a fraction of your former wages.

As a result, you may be leaning more heavily on credit card use to bridge the gap and cover your necessities, such as food and utilities. Meanwhile, your outstanding balance keeps increasing, as do the minimum payments required. And if you’re only paying those minimum payments and looking at a high interest rate on your card, you may be getting sucked into a debt spiral. Especially if you’re also trying to pay off loans, too. All of this will cause your credit score to take a hit.

In addition, if you have a mortgage, you know you don’t want to miss those required payments because the lender could put your house or home into foreclosure and seize it.

Unfortunately, many people in this situation will apply for new loans or credit cards in a desperate attempt to stay afloat. But this just leads to further debt obligations. The far better solution is filing for bankruptcy.

Filing for Bankruptcy After a Job Loss

There’s no shame in filing for bankruptcy. Job loss is a very common reason to file for bankruptcy. In fact, Chapter 7 bankruptcy was specifically designed to help low-income or unemployed debtors who don’t have non-exempt assets. Examples of non-exempt assets generally  include the following:

• second home or vacation property
• investments beyond a retirement account
• expensive vehicles
• valuable art, coin, or other collections
• luxury clothing or musical instruments not related to your work

With a Chapter 7, you’ll receive a trustee who will ensure you don’t have any of the above items that can be liquidated and used to pay off your creditors. And because you have none of these assets and little to no income, you won’t be responsible for paying your creditors.

Another benefit of a Chapter 7 bankruptcy is that you don’t need to be employed to file for it. You do, however, need to pass a means test.

A means test will look at whether your income is below the median for the state where you live. This is determined by looking at your average income over the last six months. If you fall under the median, then you pass the means test and are eligible for Chapter 7 bankruptcy.

Even if you’re receiving unemployment benefits, they’re typically not enough to put you over the median income for your state. If they are, however, you’ll be required to look at your disposable income left after subtracting necessary expenses as allowed in your state. This situation is pretty rare, though.

What About Filing for Chapter 13 Bankruptcy?

Losing your job or taking a cut in your income can be problematic for those who want to file a Chapter 13 bankruptcy, and it may be discouraged by a bankruptcy attorney.

If you’re already in the process of a Chapter 13, however, and are in the middle of executing a debt repayment plan, there are options. Your trustee can work with you if you only need a temporary reprieve from your debt repayment plan. You’ll need to follow the trustee’s instructions to a T to avoid building interest and fees.

If a temporary reprieve isn’t enough, you may be able to lower your payment permanently, ask for a “hardship” discharge, switch or convert your case to Chapter 7, or completely dismiss your Chapter 13 case. Each of these options has different pros and cons. These options, as well as which path to take when filing, are best discussed with an experienced bankruptcy attorney.

Give Yourself a Fresh Start

Filing for bankruptcy after a job loss may well be exactly what you need to get you back on your feet. So take advantage of this great option.

Contact us today to consult with our experienced and skilled bankruptcy lawyers who can help you begin the bankruptcy proceedings.

And give yourself a chance to get back out there and start new.