Things Self-Employed People Need to Know About Bankruptcy
Many self-employed individuals who run into financial difficulty are under the false assumption that they don’t qualify for bankruptcy. But the truth is that bankruptcy is for all people, self-employed, wage-earners, unemployed and business men and women. But just like with other things, filing for bankruptcy as a self-employed person is slightly different than filing as an employee or even an unemployed person.
Below are a few things you need to know:
- While the employee filing for bankruptcy needs to present their w-2, self-employed individuals will need to provide other proof of income. Presenting a profit and loss statement, bank account statements or other proof in your bankruptcy filing may be enough. If you have kept track of your self-employment income, this should be easy. But if you have not kept meticulous records of your income, then it may be a little more difficult. The remedy to lack of income documentation is to begin documenting your income as soon as you even begin to consider bankruptcy as an option. Also, talk to your bankruptcy attorney about alternative ways to prove income.
- Both the self-employed and company worker need to provide a tax return with their bankruptcy filing. Unfortunately, many self-employed individuals delay filing taxes especially in the infancy of their business. If you have failed to file taxes you need to do that immediately and provide the tax return information to the bankruptcy court.
- Self-employed debtors are often faced with income fluctuations. Since the bankruptcy court uses the 6 month time period prior to filing bankruptcy to determine a debtor’s monthly income, this can be a problem for some self-employed bankruptcy filers. If you have major fluctuations in your income and feel that the six month time period prior to your bankruptcy filing will artificially inflate your income, speak with your bankruptcy attorney.