If you’re unemployed and struggling with debt in Colorado, you may be wondering whether filing for bankruptcy is the right move. The idea of taking on a legal process while not earning a paycheck can feel overwhelming—but in some cases, it can be the best path forward. At the Law Offices of Andrew F. McKenna, P.C., we help Coloradans understand their options and take control of their financial futures.

Understanding Bankruptcy and Unemployment

Being unemployed does not automatically disqualify you from filing for bankruptcy. In fact, it can sometimes improve your eligibility, especially for Chapter 7 bankruptcy. Since Chapter 7 focuses on wiping out unsecured debts (like credit card bills and medical expenses), the court looks at your income level to determine if you qualify. If you’re currently unemployed, your income may fall below Colorado’s median income threshold, making you eligible.

Chapter 13 bankruptcy, on the other hand, requires you to propose a repayment plan based on your income. Without a reliable income stream, it’s generally not a viable option—unless you have other sources of income (such as unemployment benefits, retirement funds, or support from a spouse).

When Bankruptcy Makes Sense

Filing for bankruptcy while unemployed may be a smart move if:

• Your debts are overwhelming and you have no realistic way to repay them.
• Creditors are pursuing you aggressively through collections, lawsuits, or wage garnishment.
• You are trying to protect key assets like your car or home.
• You expect your unemployment to continue for the foreseeable future.

Bankruptcy provides an automatic stay, which stops most collection actions immediately. This can offer much-needed breathing room while you figure out your next steps.

What to Consider First

Before filing, it’s important to:

• Evaluate your assets: Bankruptcy may involve selling some property to pay creditors.
• Understand the long-term impact: Bankruptcy can stay on your credit report for up to 10 years.
• Explore alternatives: If your unemployment is temporary, debt negotiation or credit counseling might be a better fit.

A knowledgeable bankruptcy attorney can help you weigh these factors based on your specific situation.

Get Help From a Colorado Bankruptcy Attorney

At the Law Offices of Andrew F. McKenna, P.C., we assist unemployed individuals across Colorado with navigating the bankruptcy process. We can help you determine whether bankruptcy is the right choice—and if so, how to proceed in a way that protects your interests.