Self-Employed Individuals Can File For Bankruptcy Too!
Being your own boss can have numerous advantages. You can influence when you receive income, have a wider range of retirement saving options, you have more influence over expense deductions and more. But it can also be incredibly expensive. There are many aspects to consider, such as overhead costs, payrolls and marketing.
Self-employed individuals often find themselves spending more than they are earning. A couple of months of being unable to cover your expenses can result in a serious debt. If self-employment costs become absurd and unsustainable, maybe it’s time to consider looking for a good San Diego bankruptcy attorney.
Proving Your Monthly Income
Self-employed individuals are entitled to Chapter 7 or Chapter 13 bankruptcy much like any other consumer, but filing for bankruptcy might be a bit more complicated. A self-employed individual has to disclose their income. The bankruptcy court conducts a means test to determine whether they are eligible to file for bankruptcy or not, and which chapter they qualify for.
If a self-employed individual’s income is less than the family average for San Diego, a bankruptcy attorney can help them, as they are eligible to file without even taking the means test. The American Community Survey (ACS) has a list of median incomes for San Diego and all other states, which can be used use to determine where you fall when it comes to median income.
As a sole proprietor, if it turns out you have to take the means test, you will have to fill different forms according to which chapter you are filing for. The means test is very difficult for self-employed individuals. Company employees can disclose their paychecks, while self-employed individuals have to find other means to prove their income. For example, tax returns and bank deposits can help prove the income.
Sole Proprietors Bankruptcy
When you are a sole proprietor, personal and business debts are counted as one. This means that a sole proprietor has to present both personal and business debts and income. Chapter 7 bankruptcy could remove both types of debt provided the sole proprietor qualifies. Chapter 7 is also a good choice for individuals with a lot of nonexempt assets. This way they will not have to sell much of their property. However, having a lot of these assets might mean losing more of them because the trustee will have to liquidate them to cover the debt.
On the other hand, Chapter 13 bankruptcy is a great option as it won’t hinder the sole proprietor’s business. Not having to sell any assets means that a self-employed individual can keep their business going, earning monthly paychecks and still keep paying the debt off. But they will have to be able to cover both their expenses and the monthly repayment rates. If they fall behind on their bankruptcy payments, the court can dismiss their bankruptcy case and force them into the same difficult situation they were previously in.
Look for a Respectable San Diego Bankruptcy Attorney
If you are a self-employed individual facing this tough financial situation, look for an experienced bankruptcy attorney in San Diego at Chang & Diamond, APC. If your expenses top your earnings, bankruptcy might be your best solution. Contact us at (619) 312 – 4900 for a free initial consultation.
The information you obtain in this article is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.