Is Bankruptcy Different if You’re Self-Employed?Saturday, May 15th, 2021, 9:01 am
Being self-employed has many benefits. You get to set your own hours, decide what clients you take on, and much more. You’re the boss, and at the end of the day, all decisions are yours. However, there are some downsides to self-employment. If you’ve ever tried to apply for a mortgage, for example, you know how much extra paperwork you have to go through to prove your income. Filing for bankruptcy when self-employed is also a little different than it would be if you were traditionally employed.
Proving Your Income
One of the first steps in the bankruptcy process is to show your income. As a self-employed individual, you can’t simply produce paystubs. Instead, you’re going to need to bring more documentation. The first will be three years of your bank statements, both from your personal accounts and from any business accounts you have.
You may also need to provide invoices, receipts, check stubs, and other documents that show any transactions that didn’t go through your bank account. For example, if you’re getting paid via PayPal for remote work, you’ll need to provide copies of those transactions. You’ll also need to bring in tax returns, including your business returns, for the past four years.
Document Profits and Losse
You will likely be asked to submit profit and loss statements for several years. These statements are like a financial summary of a month, quarter, year, or other specific period. You’ll list all of your business income and expenses for that period. You’ll also calculate the net income by subtracting those expenses from the income. This lets the bankruptcy court and your creditors see where you stand and what resources are available to you.
Be Incredibly Detailed
While it’s important that everyone regardless of their employment type be detailed in their bankruptcy statements, self-employed individuals need to be certain they are listing everything. Your documents are going to be highly scrutinized, and you’re going likely going to have to backup all of your income and expenses with proof. This can be difficult, especially if you don’t have a knowledgeable bankruptcy attorney on your side.
That’s where we come in. The team here at Michael F. Kanzer & Associates can help you with all of your bankruptcy needs. Contact us today to schedule a free consultation.