There are thousands of self-employed individuals in the Dallas-Fort Worth area facing financial difficulty; but many of them are under the false assumption that because they are self-employed they don’t qualify under the new Chapter 7 and Chapter 13 bankruptcy laws. Being self-employed does not disqualify you from filing Chapter 7 or Chapter 13 bankruptcy; but it can certainly make your bankruptcy case more complex.
One of the provisions of the new bankruptcy law that makes it especially complex for self-employed debtors to file bankruptcy is the requirement to calculate current monthly income. In bankruptcy cases, current monthly income is defined as the average monthly income for the previous 6 months before the date bankruptcy was filed. For w-2 employees documenting income is easily accomplished with paystubs; but since an entrepreneur’s income can be sporadic and undocumented this rule can be a major headache in the bankruptcy filing.
The remedy for tracking self-employed earnings is a profit and loss statement. But anyone who has ever been self-employed or knows an entrepreneur is quite aware of the fact that most self-employed people don’t keep track their income with P&L statements. Unfortunately, failure to document income will definitely lead to a bankruptcy case dismissal. So, if you’re doing any type of self-employment work you need to begin tracking your income if you’re considering filing either Chapter 7 or Chapter 13 bankruptcy.