Three Things To Consider When Working Extra Hours and Considering BankruptcyMany debtors take on lots of overtime and part-time jobs in an effort to repay their debts before they eventually realize that their debts are impossible to repay and decide to file bankruptcy.  But filing bankruptcy while working over-time or a part-time job may have some implications that debtors should consider.

  1. By working over-time and/or an additional part-time job, a debtor’s income may be inflated and disqualify them from Chapter 7 bankruptcy.  Remember, Chapter 7 bankruptcy allows the debtor to discharge their unsecured debts; while the alternative Chapter 13 bankruptcy, requires that the debtor repay their debts over a period of 3 to 5 years.  Most debtors prefer and need to discharge their debts in Chapter 7 bankruptcy, and not having access to that chapter of bankruptcy can have negative impact on their fresh financial start.
  2. Does the debtor intend to continue working their part-time job or over-time hours for the next 3 to 5 years while in Chapter 13 bankruptcy?  In most cases the answer is no. Most debtors work the extra hours or extra job in an effort to pay off their debts with the intention of quitting once they are accomplish that task.  Working over-time or an additional job for 3 to 5 years while in bankruptcy is simply not desirable or sustainable.

If the debtor quits their part-time job or stops working over-time will it be viewed as a bad faith act by the bankruptcy trustee?  This is something that should be discussed with a bankruptcy attorney.  In most cases it will not be viewed as a bad faith act to quit working extra hours or an extra job if it is done for a good reason.  However, some bankruptcy attorneys suggest that the debtor wait at least six months after they quit their extra job or overt-time to file bankruptcy.