In light of the recent massive layoffs by Doge, many government employees are now finding themselves in difficult financial situations. With uncertain job prospects and mounting debt, it is natural to feel overwhelmed. If you are struggling to make ends meet, bankruptcy may be a solution that provides the protection and relief you need—while helping preserve the things that matter most, like your home, savings, and retirement.
Why Bankruptcy is a Great Option for Government Employees
Bankruptcy is not just about wiping away debt—it is about getting a fresh financial start and rebuilding a good credit rating. For many government employees, bankruptcy can offer significant advantages in the wake of a layoff or financial hardship. Here is how it can help:
1. Protect Your Emergency Savings and Retirement Funds
One of the greatest fears when facing financial troubles is losing your hard-earned savings and retirement funds. Fortunately, bankruptcy offers strong protections for these assets. In Chapter 7 or Chapter 13 bankruptcy, most retirement accounts (such as 401(k)s and IRAs) are exempt from creditors, meaning they are safe and cannot be seized. Additionally, your emergency savings can be protected depending on the exemption laws in your state. In California, we have great options for protecting your emergency savings funds.
2. Preserve Your Home Equity
If you own a home, bankruptcy can help save it. In Chapter 13 bankruptcy, for instance, you can reorganize your debts and keep up with your mortgage payments while catching up on any arrears. Even in Chapter 7 bankruptcy, certain home equity may be protected through exemptions, ensuring you can stay in your home while you get back on your feet. In California, Attorney Jenny Doling was instrumental in advocating to change California’s homestead exemption laws. In 2020, she worked with California Senator Bob Wieckowski to pass new homestead legislation, and she testified before the California State Assembly and the California State Senate in support of AB 1885 which created a minimum homestead exemption of $300,000 (now $361,110) and a maximum of $600,000 (now $722,220). The homestead exemption is now tied to the median sale price of homes in each county, not to exceed the statutory maximum.
3. Eliminate or Reduce Debt
Bankruptcy can provide immediate relief from overwhelming debts. Chapter 7 bankruptcy allows for the discharge of unsecured debts such as credit card bills, medical bills, and personal loans, freeing you from the burden of monthly payments. If you do not qualify for Chapter 7, Chapter 13 allows you to reorganize your debts into a manageable repayment plan, typically over three to five years. Both options offer a path to eliminating debt and giving you the breathing room you need.
4. Get Relief from Collection Actions
Filing for bankruptcy automatically triggers the automatic stay, which puts an immediate stop to collection actions, such as wage garnishments, lawsuits, creditor calls, or repossessions. This protection can provide instant relief and allow you to focus on stabilizing your finances without the constant pressure of creditors.
Take the First Step Toward Financial Relief
Bankruptcy can offer much-needed relief for government employees facing financial hardship due to layoffs. By filing for bankruptcy, you have a better chance to preserve your emergency savings, home equity, and retirement funds, while also eliminating debt and stopping collection actions. If you are feeling overwhelmed by debt, consulting with a bankruptcy attorney can help you explore your options and find the best solution for your situation. A fresh start could be closer than you think. Call for a FREE CONSULTATION (844)894-4440. We represent clients throughout California.
Author: Jenny L. Doling, Esq., LLM Taxation
CA State Bar Certified Bankruptcy Specialist
NACBA – Vice President
San Diego Bankruptcy Forum – Immediate Past President
Serving Bankruptcy Clients throughout California and
Serving Tax Clients Nationally