Unpaid Maternity Leave and Bankruptcy:

What You Need to Know

If you are on unpaid maternity leave (or planning to take it) and struggling financially, you may be wondering how bankruptcy fits into the picture. This is a very common situation — and one where timing and planning matter a great deal.

Unpaid maternity leave can:

• Reduce income temporarily

• Affect Chapter 7 eligibility

• Make a Chapter 13 plan unaffordable

• Create confusion about when to file

This page explains how unpaid maternity leave affects bankruptcy, what options may be available, and how to protect yourself during this period.

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First: You Are Not Alone — and This Is Not a Failure

Unpaid maternity leave often creates financial strain through no fault of your own. Bankruptcy law recognizes income changes, and pregnancy or parental leave is one of the clearest examples of a legitimate, involuntary hardship.

The key is choosing the right timing and chapter.

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How Unpaid Maternity Leave Affects Bankruptcy

1️⃣ It Reduces Income — Sometimes Significantly

Unpaid leave may result in:

• Zero income for weeks or months

• Partial income (short-term disability, PTO, or state benefits)

• A temporary but severe cash-flow crunch

Bankruptcy looks at income over time, not just one paycheck — so how long you’ve been on leave (and when you file) matters.

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Chapter 7 Bankruptcy and Unpaid Maternity Leave

Why Chapter 7 May Become More Accessible

Chapter 7 eligibility is based on:

• Past income averages (means test)

• Current ability to pay

Unpaid maternity leave can:

• Lower your average income

• Help you qualify for Chapter 7

• Eliminate unsecured debt without a monthly plan

For some people, waiting until unpaid leave begins makes Chapter 7 possible when it wasn’t before.

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Important Caution About Timing

Filing too early (before income drops) may:

• Reflect pre-leave income

• Push you into Chapter 13 unnecessarily

Filing too late may:

• Create emergencies (rent, utilities, lawsuits)

This is where planning is critical.

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Chapter 13 Bankruptcy and Unpaid Maternity Leave

Why Chapter 13 Can Be Difficult During Unpaid Leave

Chapter 13 requires:

• Regular monthly income

• Ability to make consistent plan payments

If you are on unpaid maternity leave:

• A Chapter 13 plan may be impossible to fund

• Trustees may object to feasibility

• Payments may be unsustainable

In many cases, Chapter 13 should be avoided during unpaid leave unless there is no alternative.

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If You Are Already in Chapter 13

Unpaid maternity leave may qualify as a hardship.

You may be able to:

• Modify your plan

• Temporarily suspend payments

• Reduce your payment amount

Do not stop paying without talking to your attorney — that can lead to dismissal.

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What About Short-Term Disability or Paid Leave?

Income from:

• Short-term disability

• Employer-provided paid leave

• State benefits

Counts as income for bankruptcy purposes, but often at a lower level than regular wages.

This can still:

• Improve Chapter 7 eligibility

• Reduce Chapter 13 payment pressure

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Expenses That Often Increase During Maternity Leave

Trustees and courts recognize increased expenses such as:

• Medical bills

• Baby supplies

• Childcare planning costs

• Health insurance changes

These expenses should be fully and accurately disclosed — underreporting them can make a case look artificially affordable.

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Common Myths About Maternity Leave and Bankruptcy

“I have to wait until I’m back at work.”
Not always — sometimes filing during leave is better.

“No income means I can’t file.”
False — lack of income can actually help Chapter 7 eligibility.

“Trustees won’t understand maternity leave.”
They do — it is a well-recognized, legitimate hardship.

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Strategic Timing Questions to Ask Before Filing

Before filing bankruptcy during or around maternity leave, it’s important to evaluate:

• When unpaid leave starts

• How long it will last

• Whether income will return (and at what level)

• Whether Chapter 7 or Chapter 13 makes more sense

• Whether waiting a short period improves outcomes

Small timing differences can have big legal consequences.

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What You Should Not Do

❌ Drain retirement accounts
❌ Take high-interest loans
❌ File Chapter 13 you can’t afford
❌ Guess about timing
❌ Hide income or benefits

These create long-term problems.

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The Bottom Line

Unpaid maternity leave does not disqualify you from bankruptcy — and in many cases, it makes bankruptcy more effective if handled correctly.

The key is:

• Choosing the right chapter

• Filing at the right time

• Accurately disclosing income and expenses

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Talk to a Bankruptcy Attorney Before Filing During Maternity Leave

Bankruptcy decisions made during unpaid maternity leave should be strategic, not rushed. A short planning conversation can prevent years of regret.

Ginsburg Law Group helps clients:

• Evaluate bankruptcy timing during unpaid leave

• Determine Chapter 7 vs Chapter 13 eligibility

• Modify Chapter 13 plans when leave occurs

• Protect families during financial transition

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📞 Call us today for a free, confidential bankruptcy consultation – 855-978-6564 or email us at bankruptcy@ginsburglawgroup.com.

Contact our Bankruptcy Team: bankruptcy@ginsburglawgroup.com

We work with most major legal services and legal insurance plans.  Some cover your legal fees for bankruptcy services.  Give us a call today to see if your bankruptcy is covered!

BANKRUPTCY TEAM

AMY GINSBURG – aginsburg@ginsburglawgroup.com

GRACIE KLEIN – gklein@ginsburglawgroup.com

NICOLE LOMBARDI – nlombardi@ginsburglawgroup.com