Self-Employed Bankruptcy Filing Manual
Guide On Filing For Bankruptcy While Self-Employed In Arizona
Working for yourself gives you great freedom, but also great responsibility. You have the ability to set your own schedule, make your own rules, and make your own profits. There’s no middle man – you see the direct results of your own effort.
But working for yourself also comes with a lot of risk. You are solely responsible for your losses (just as you are solely to benefit from your gains). After an extended period of losses, you might start to struggle with debt. You may be using your personal credit or assets to keep your business afloat, or just to support yourself while you are not pulling in the income you need. After a certain point, you may decide that you need to seek the advice of a bankruptcy attorney and look into debt relief through bankruptcy protection.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is known as “total liquidation” bankruptcy because it allows you to completely discharge any unsecured debt. In order to file for Chapter 7 bankruptcy, you have to pass the means test. This test looks at your income compared to the median income in Arizona. You must fall under a certain income threshold to qualify.
The means test also looks at your disposable income each month by averaging your income for the last six months and subtracting your monthly debts, such as your rent or mortgage, your car payment, your credit card payments, and more. If you have too much disposable income – what’s left after expenses – you are unlikely to qualify for Chapter 7 bankruptcy.
Taking the Means Test When Self-Employed
In order to pass the means test, you have to provide documentation proving your income. In most cases, this is not a problem. Most people just show the required number of pay stubs, and that’s it. But if you are self-employed, you don’t have pay stubs. You likely don’t even have a stable income. Your income may fluctuate wildly from month to month.
To pass the means test, you will need to use what you can to show your income over time. Many submit their tax returns, and some also use their bank deposits. You’ll need to talk with a bankruptcy attorney to figure out the best way to show your income, depending on your personal circumstances.
Choosing the Right Type of Bankruptcy for You
If you do not have a lot of assets, such as a home that you are paying for or a business property, then Chapter 7 bankruptcy is likely going to give you the most debt relief. As a sole proprietor, your business debts are likely mingled with your personal debts and can, therefore, be discharged with Chapter 7 bankruptcy also.
If there are assets that you want to keep that would not be exempt under Chapter 7, then Chapter 13 bankruptcy might be the better choice for you. Under Chapter 13 bankruptcy, your debts are restructured into a payment plan that lasts three to five years. You make one monthly payment, and debts that are remaining at the end of the repayment term may be discharged. If you are behind on your mortgage or other accounts, you can include those payments in the restructured plan to avoid foreclosure or repossession.
Bankruptcy offers many benefits for those who are self-employed and who have fallen on hard times. You can file for bankruptcy protection if your business has been flagging and you have run up a lot of credit card or other debt. You can protect yourself from further losses and position yourself for a fresh start.
Contact Experienced Bankruptcy Lawyers In Gilbert
Call Gilbert Bankruptcy Lawyers today to learn more about how bankruptcy might be able to help you. An experienced bankruptcy attorney from our team will review your personal and business finances and talk to you about your goals through bankruptcy and then recommend the best course of action. We represent individuals in both Chapter 7 bankruptcy and Chapter 13 bankruptcy, and we can help you get fast debt relief. Call our bankruptcy law office in Gilbert today to schedule an appointment with a bankruptcy lawyer and learn more about your options for debt relief.