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West Palm Beach Bankruptcy & Business Attorneys > > Bankruptcy Attorneys > Self-Employment and Bankruptcy: What to Consider

Self-Employment and Bankruptcy: What to Consider


When you are self-employed, the prospect of filing for bankruptcy can seem especially complicated and confusing. You may be unsure about how a bankruptcy petition for business debt will impact your individual finances, or vice versa. A West Palm Beach bankruptcy attorney at our firm can give you more information about self-employment and bankruptcy.

Truly Self-Employed Individuals Usually Own Sole Proprietorships or Partnerships 

If you are truly self-employed for taxation and legal purposes, this means your business likely has been structured as a sole proprietorship or a partnership, or you are a gig worker. Technically, even if you are an owner of a limited liability company (LLC) or a corporation, you are not self-employed according to the IRS. Indeed, as the IRS clarifies, you are generally said to be self-employed if you “carry on a trade or business as a sole proprietor or an independent contractor,” or “you are a member of a partnership that carries on a trade or business,” or “you are otherwise in business for yourself (including part-time business or a gig worker).”

It is essential to understand these distinctions because they can ultimately play a central role in determining the type of bankruptcy you are eligible to file for, as well as whether or not your personal finances will become part of your bankruptcy case.

How Self-Employed Individuals Can File for Bankruptcy 

If you are self-employed, your options for bankruptcy will depend upon the structure of your business, or the manner in which you are self-employed. Independent contractors or gig workers, as well as sole proprietors, are not distinct entities from their businesses. Accordingly, anyone in this position who files for a business bankruptcy will also be filing for an individual bankruptcy, and vice versa. It does not matter if your business is struggling with debt, if you are personally struggling with debt, or both. The bankruptcy filing will include business and individual finances.

In these circumstances, a self-employed person may be able to file for Chapter 7 bankruptcy (a liquidation bankruptcy), or Chapter 13 bankruptcy (a reorganization for consumers and not businesses, but applicable for self-employed individuals who are independent contractors or sole proprietors), Chapter 11 bankruptcy if your debts are too high for Chapter 13, or Chapter 12 bankruptcy if you meet the requirements (you must be a family farmer or fisherman, and a specific amount of debt must come from your business).

In other types of business structures, a business will need to file for bankruptcy separate from the individual owner(s). Businesses in general can be eligible to file for Chapter 7 bankruptcy, Chapter 11 bankruptcy, and in relevant circumstances Chapter 12 bankruptcy.

Contact a West Palm Beach Bankruptcy Lawyer 

If you are self-employed and you are struggling with debt, it is important to contact one of the experienced West Palm Beach bankruptcy attorneys at Kelley Kaplan & Eller. Our firm has been serving individuals and businesses in South Florida for years, and we can speak with you today about your bankruptcy case. Do not hesitate to get in touch with us to find out more about your options for filing for bankruptcy as a self-employed business owner or to get started on a bankruptcy filing.




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