Many individuals that file for bankruptcy are unemployed, and by being unemployed, they qualify for a Chapter 7 bankruptcy. However, what happens if an unemployed person who files for Chapter 7 finds a job while he is still in the bankruptcy? What if he finds a great job that pays a substantial amount of money? The quick answer is that the new job could negatively affect the bankruptcy case!
Under the new bankruptcy rules, an individual’s income has a lot to do with whether or not he qualifies for a Chapter 7. There are really two tests that an individual must pass in order to qualify. The first is the means test in which the court looks at the individuals last 6 months of income. The second is the old bankruptcy law test in which the court looks at your current income and compares that to your current expenses. If there is a decent amount left over, the court could say that you do not qualify for a chapter 7 because you have excess income that could fund a chapter 13. So, a person could pass the means test but may still not qualify for a Chapter 7 because his or her income is more than their normal household expenses.
So, to follow up on the main topic, an individual who is unemployed for a part or all of the six months prior to filing the Chapter 7 case probably would pass the means test. However, if that person obtains a job right before filing or shortly after filing, and the income received from the job is more than that person’s household expenses, the court may deny that individual’s Chapter 7 case from going through. Therefore, the timing of the bankruptcy is very important and an individual who wants to obtain a discharge in a chapter 7 better not obtain a high income job that provides him with disposable income (income left over after all normal household expenses).
In conclusion, a person usually can obtain a job after their Chapter 7 Bankruptcy case is filed as long as the income the intent to receive does not give them disposable income at the end of the month. If there is disposable income, the Bankruptcy Court could deny that person’s Chapter 7 Discharge because a Chapter 13 would be the better fit for that individual. For a side note, I have never seen the U.S. Trustee attempt to dismiss a case like this in the Northern District, but I have read many cases in other parts of the country to where this is becoming an issue. If you find yourself in this situation and need advice on this, please call me a the number below.
Chirnese L. Liverpool, Esq.
Law offices of Chirnese L. Liverpool, PLLC
6277 Van Nuys Blvd. Suite 126
Van Nuys, CA 91401
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