Bankruptcy Options for Self-Employed Debtors

Generally, there are two bankruptcy options for self-employed debtors.  One is to file a Chapter 7 bankruptcy proceeding and the other is to file a Chapter 13 bankruptcy proceeding. A Chapter 7 proceeding occurs where the debtor agrees to liquidate assets in order to pay off debts, while a Chapter 13 bankruptcy proceeding occurs where the debtor negotiates the payment of debts and does not liquidate assets to do so.  Rather, the debtor will agree to a payment plan in order to pay off his or her creditors.

Problems Facing Self-Employed Debtors

Under Chapter 7 and Chapter 13 bankruptcy laws, self-employed debtors frequently experience difficulty when attempting to qualify for bankruptcy.  One requirement of the bankruptcy laws is the calculation of the self employed debtor’s current monthly income.  The monthly income is based upon the average income for the past six months prior to the filing of the bankruptcy proceeding.  For a self-employed debtor, providing the proof of this calculation is difficult and in some cases impossible; a self-employed person does not generate pay stubs and therefore must attempt to provide some other form of documentation to present to the bankruptcy court.

Getting Legal Help

If you are a self-employed debtor contemplating bankruptcy, it is crucial to consult with an experienced bankruptcy attorney.  An experienced bankruptcy attorney can review your case in order to advise you as to what legal options you may have in your particular state and what options serve your best interests and personal goals.  In addition, the attorney will have a thorough understanding of the intricacies of the bankruptcy laws and be able to present your case in the most advantageous way.