Filing Bankruptcy When You Are Self Employed
Self-employment can be challenging in different aspects since you are in business for yourself. A sole proprietor or an independent contractor most likely takes financial risks to help get the business off the ground. But for some, it leads to debt that becomes too difficult to handle. Many who are self-employed are often under the impression that they are ineligible to file bankruptcy since their situation is different from those who earn wages. While you have the option to file bankruptcy, the option itself can be a challenge if you don’t have proper documentation.
Part of the bankruptcy filing procedure includes providing proof of income and meeting specific income requirements for the chapter you wish to file. For a consumer who earns wages, they provide documentation such as their recent paystubs, W-2 or tax information. As a self-employed individual, you’ll need to provide documentation to show what you earned. This may include bank statements, a profit and loss sheet and income tax information. You’ll likely need to have about 6 months’ worth of income information to present when filing.
If you’re unable to provide information about earnings, this could make your case more challenging. Many self-employed individuals don’t keep detailed records of their earnings or file income tax information. Your bankruptcy attorney needs the total financial picture to help determine which chapter to file; either Chapter 7 or Chapter 13 . Chapter 7 may allow you to use qualifying assets to pay off outstanding debt or obtain a discharge. Chapter 13 can help you keep your assets with a repayment plan that usually last 3 to 5 years. Questions and concerns should be discussed with your Dallas bankruptcy attorney .