While East Texas unemployment is somewhat lower than the nation, the unemployment rate doubled in 2009. We’ve seen major employers, such as Pilgrim’s Pride, U.S. Steel, Trinity, and Titek close or layoff hundreds of workers. This affects the individuals and families of the laid off worker, and it also impacts the businesses that these families supported by spending their wages. Also significant is the length of time it is taking to find a job after being laid off. The Texas unemployment maximum of $406 per week just isn’t enough to pay the bills.
If you have been laid off, set your priorities. Make out a budget to pay the essentials only, your home mortgage, your car payment and insurance, food and utilities. If you have credit card debt or other unsecured loans, you should pay them last or not at all. Try calling your creditors and working out temporary deferments. Definitely, do not borrow from a 401(k) or cash in an IRA to pay unsecured debt. We frequently see people who have borrowed from 401(k)’s or liquidated other nonexempt assets to pay debts that could have been wiped out in bankruptcy. If bankruptcy is inevitable, you are better off to preserve the assets that you do have in order to be able to get back on your feet.
If you pass the means test (and most likely you will if you have lost your employment income and are receiving only unemployment), you have the option of filing a Chapter 7 bankruptcy. This will enable you to wipe out any unsecured debt that you have. It will not help you catch up on a car payment or a house payment. You can, however, if needed, surrender a car in a Chapter 7 if you are unable to continue to afford the payment and have other options.
You may also have the option of a Chapter 13 bankruptcy. This will help you catch up on a past due mortgage payment, past due car payments, and in general reorganizes your debt to reduce the amount you have going out each month. The problem here is that if you are not married with a working spouse or if you don’t have another source of income, it can be hard to show that your plan is feasible.
In other words, you have to be able to demonstrate that you have enough regular income to pay your expenses, plus a Chapter 13 plan payment to repay the past due mortgage. If making your mortgage and car payment is not possible, you may consider a loan modification along with a Chapter 13 bankruptcy. Again, this usually takes more income to the household than just unemployment benefits, but may work if a spouse or family member has income that can help along with the unemployment benefits.
If you have been laid off, don’t panic. Talk with an experienced bankruptcy attorney about your options. You may need to do some pre-bankruptcy planning. Don’t liquidate or transfer any assets without talking with an attorney. This can create problems if you do need to file bankruptcy.
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