Thursday, November 3, 2016
Can I File Bankruptcy If I Am Self Employed?
When the decision to file bankruptcy is made, part of the process includes looking at your income and how it compares to your total debt load. For most people, determining how much you make is easy – you simply look at your pay stubs. But if you are self-employed, you most likely do not have a regular paycheck, so providing an accurate picture of how much you make can be challenging. If you are worried this might stop you from being able to file bankruptcy though, please note there are alternative ways to show your salary.
For those that are self-employed and file bankruptcy, here are a few options when fulfilling the requirement that your income be disclosed:
• Use of the past few years’ tax returns can show your financial history.
• Provide copies of your business banking accounts, showing payments made to you as salary.
• Provide copies of any checks you wrote to yourself, and give testimony as to what the payment represented.
• Provide copies of any profit and loss statements for the business.
The requirement to provide your income data when filing for bankruptcy is due to the need to perform a legally required computation that determines which type of bankruptcy case you qualify to file. The income is averaged over a certain period of time, so you have to have the records that support the figures you provide within your bankruptcy filing. There is no prohibition against filing a case if you are self-employed, but you just might have to give a little bit more effort when gathering your documents that those filers who have a salaried position.
As long as your numbers match up to the documents at your disposal, there should not be any question about what you make. It is also important to remember to separate out any personal expenses or payments, made to or from your business, so your business records can be reviewed for funds that belong to you versus those that are tied up with your company. Sometimes it is helpful to engage an accountant, along with an attorney, to make sure you don’t overlook any important information.
For more information about what to do if you are self-employed and need to file bankruptcy, call us today or reach us online at www.law-ri.com. We offer appointments at multiple locations for your convenience and can schedule a time to visit with you soon.