SC Bankruptcy


Should I Quit my Job in Order to Qualify for Bankruptcy?


To qualify for Chapter 7 Bankruptcy, you need to pass the Means Test. The Means Test takes a look at your gross income from all sources in six months prior to the filing of the bankruptcy not including the month of filing. You can find out more information on the means test HERE. If you are above median income, you will not be able to file Chapter 7 Bankruptcy. You would likely have to file for Chapter 13 Bankruptcy.


Sometimes clients who are above median ask if they should stop working in order to qualify for Chapter 7/ pass the means test.


Do not let Bankruptcy impact or change your life in such a way that you stop doing what you normally do in order to qualify for Chapter 7*. In general, Bankruptcy will help eliminate your unsecured/ credit card debts. It does not eliminate your normal monthly expenses.  If you quit your job, you would not be able to pay your living expenses (such as electricity, food and car payments).  In addition, to qualify for Bankruptcy, you need to pass the Good Faith Test. The Good Faith Test takes a look at your income at the time of the filing and in the foreseeable future. If you do not pass the good faith test, you will have to file or convert a case to Chapter 13. Quitting your job before filing for bankruptcy will raise the suspicions of the United States Trustee who may try to dismiss your case.


That said, if you have taken a part-time (or multiple jobs) in addition to your full-time job (or are working a lot of overtime) just to pay the minimum payments to your credit cards, you can quit the extra job (as long as you make enough to pay your normal monthly expenses with your FT job). Anyone who has worked multiple jobs will tell you the mental and physical toll it causes, and the UST does not expect you to sacrifice your health in order to pay your creditors.


*As an aside, although quitting a job might not be advised, we might recommend taking advantage of any allowable expenses. These “good” expenses, if applicable, might include but may not be limited to car payments, retirement account(s), life insurance and health insurance. Expenses such as these will decrease your disposable income and set you up for a successful financial future. We will also help you set up a no-surprise budget.