Bankruptcy Options For The Self-Employed
The prospect of considering filing for bankruptcy can be daunting. If you are facing financial challenges, you may be able to seek legal protection from your creditors by filing either Chapter 7 or Chapter 13 bankruptcy. However, if you are an entrepreneur or a self-employed independent contractor, you may face even further challenges after filing for bankruptcy. The type of bankruptcy you file will largely depend upon your income, which makes filing as a small business owner or a freelancer even more complicated.
Income Verification for the Self-Employed
You have the right to file for bankruptcy just as a regular wage earner. However, employees of companies receive a W-2 wage statement that clearly records their wages for the year. When you file for bankruptcy, you will need to provide to the court a record of your wages and a verification of your income for the six months prior to the bankruptcy filing.
The reason that verification of income is so vital in bankruptcy is that your income will determine if you are able to file for Chapter 7 or Chapter 13 bankruptcy. If you make under a certain amount of income, you may qualify for a Chapter 7 bankruptcy under the “means test”, which allows you to discharge a greater portion of your debt, and if not, you must file for Chapter 13, which is a reorganization of your debt.
If you are an entrepreneur, freelancer, or self-employed in any way, verification of your income may prove more challenging. You may not be paid on a regular basis, or more complicated, you may not have your income documented accurately. If you own a small business, you may not have actually taken any wages in the past six months.
You will need to attempt to document to the best of your ability your income and expenses to verify your income for the court. The types of documents that you may use to establish your income may include bank statements, receipts for any cash payments, copies of checks, invoices, contracts, tax returns, emails or any texts regarding payments, PayPal records or any apps that record payments. Making a determination regarding how much income or expenses you have had in the past six months can be a difficult experience, especially if you have not been diligent about keeping consistent or accurate records.
Additionally, as a small business owner, you will need to make sure that your business assets are completely separate from your personal assets. If you commingled these amounts in any way, you may face additional challenges as you attempt to verify your income, separate from personal assets.
Let Us Help You Today
While bankruptcy is a legal option for every person, self-employed people have a more complex task regarding filing for bankruptcy versus typical wage earners. Our bankruptcy lawyers have years of experience helping self-employed business owners understand their legal rights and their bankruptcy options. If you are considering filing for bankruptcy, contact the West Palm Beach bankruptcy attorneys today at Kelley Kaplan & Eller at 561-264-6850 for a consultation.