I Lost My Job Due to COVID-19: Should I File Bankruptcy?

If you lost your job due to COVID-19, you are not alone. As of mid-May 2020, the unemployment rate in the United States is the worst since the Great Depression. If you find yourself out of work and in debt, you might consider filing bankruptcy.

There are two major types of personal (not business) bankruptcies, Chapter 7 and Chapter 13.


Chapter 7, often referred to as a “fresh start”,  is the most commonly filed bankruptcy amongst individuals and works best for people with low-income and little to no assets. If a person finds themselves owing more money to creditors than they have, or can foreseeably earn, Chapter 7 is the best option. The assets that a person owns will be liquated and used to pay off their debts. After that, the bankruptcy is usually dismissed.

To determine their eligibility, the individual must take a means test as provided by the U.S. Bankruptcy Court. If the individual makes too much money, they’ll have to consider filing for Chapter 13.


Chapter 13 is often called the “wage earner” bankruptcy because the individual must have a reliable source of income. Their finances are reorganized into a plan that allows them to pay back their creditors over three to five years while maintaining control and ownership of their assets.

Chapter 13 works best for people who don’t qualify for Chapter 7 but need debt relief, have non-dischargeable debts like child support, or have fallen behind on house/car payments and want to/can catch up on payments.


Bankruptcy can be a viable solution for dealing with your consumer debts, such as credit cards or personal loans. However, it does not eliminate all kinds of debt. You will still  be on the hook for certain debts, including the following:

  • Government Debts: back taxes, student loans, etc.
  • Family Court Debts: alimony, child support, divorce settlements
  • Crime Debts: traffic tickets, fines, restitution payments, etc.


You might choose to reaffirm certain debts. Instead of erasing a debt, you’ll decide to make a new agreement with the creditor. This can make sense if you don’t want to lose collateral, like your car.


If you lost your job due to COVID-19 and are not sure how you’ll pay your debts, consider speaking with a bankruptcy attorney. Bankruptcy can be beneficial and possibly the best solution to getting out of debt in certain scenarios. If you want more information on what bankruptcy is, which chapter you qualify for, and how to file, give Kamper & Estrada, PLLC a call. Our experienced bankruptcy lawyer Phoenix, AZ residents recommend offers a free one-hour consultation and can help you learn what your options are.


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