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Unemployed by Choice

How does the courts/creditors look upon someone who files for bankruptcy and is unemployed by choice. I have chosen to stay home with my children since the cost of daycare is high and not worth going to work for the small amount I would bring home. My husband fully supports the family, but I have debt that I am considering filing bankruptcy on. I receive $100 for the Universal Daycare Benefit and $134 child tax benefit. Would I be able to file, or would my husbands income (which is good), be taken? For the surplus income, am I right in understanding that it would only be the percentage above that I contribute (i.e. $234/total surplus?) Very confusing.

Also is there a better time of year to file. I have read that the trustee takes any tax refund for your pre-bankruptcy, but that they do not take it post-bankruptcy…hence if you file earlier in the year the estate would receive less?

One Response to “Unemployed by Choice”

Barton Goth, GCO Inc. Bankruptcy Trustees said...

There is no penalty for someone who chooses not to be an active part of the “work force.” The cost of bankruptcy is simply measured with respect to your’s, and in part your family’s, household income. Essentially the way things work is that you are given a certain allowable amount per household (e.g. household of 3 = $2,729.00 after tax). The way the surplus calculation works is that you take your total household income subtract the allowable amount, divide it by 2 and multiply the resulting figure by your percentage of the family income.

From your description of things you won’t have to worry about surplus, even if your spouse brought in $40,000 after tax each month, as your income represents such a small percentage of the total you would still qualify for the minimum monthly cost.

The next issue you addressed was timing of a bankruptcy. Realistically, unless your income fluctuates drastically from season to season at what point you file really makes very little material difference.

Finally you discussed taxes, your are partially correct, the pre-bankruptcy refund automatically vests in the trustee and the post does not. However, when filing for a bankruptcy you must “voluntarily sign” (while it is a voluntary done, it is a required part of the bankruptcy process) over any refund you have for the post period and those monies are treated as an asset of the estate and distributed among your creditors. Although, in your situation, if your income is as low as you quote I wouldn’t expect you to receive a refund, so it isn’t something you should worry significantly about.