Making Bankruptcy Work for the Self-Employed - Part 1 (What You Need to Know)

Submitted by Jen Jones on Tue, 11/02/2010 - 10:42am

Making Bankruptcy Work for the Self-Employed - Part 1 (What You Need to Know)

As the economic meltdown lingers, layoffs continue and jobs remain hard to come by, many skilled and experienced Americans are turning to entrepreneurship to make ends meet. But, while it is a good time to take your financial future into your own hands in business, it is also important to understand that self-employed individuals who fall on hard times at any point in the business-building process can also take their financial future into their hands through bankruptcy.

Just like wage-earners, businessmen and women, and the unemployed, bankruptcy can be a smart option for self-employed individuals struggling to stay current in the current recessionary climate. And while the bankruptcy option is available for employees, unemployed workers and self-employed workers all the same, the rules for filing a bankruptcy case are a bit different for self-employed people.  In part one of the series, “Making Bankruptcy Work for the Self-Employed,” we’ll look at what savvy entrepreneurs need to know when pursuing the debt dissolution solutions that bankruptcy provides.

Providing Proof of Income
In order to show their income for the purposes of a bankruptcy filing, employees show their W-2 forms. In the alternative, self-employed individuals need to provide their proof of income via a profit and loss statement, bank account statements or other proof. Maybe you’re a meticulous with your records of you income and this process will be painless; but if not, it’s not too late to start. If you feel you’re bankruptcy bound, begin documenting your income now. Between these records and your bankruptcy attorney’s advice on alternative methods to prove income, you should be ready to begin the process of reaping bankruptcy’s rewards.

Returning to Your Tax Return
When filing for bankruptcy, self-employed individuals must join the rest of filers (unemployed, wage-earners, etc.) by providing a tax return. If you are considering bankruptcy, and, for whatever reason (your business is new, in various states of change, etc.)  have neglected to file taxes or are thinking about delaying your tax filing, it is essential that you go ahead and file immediately in order to provide that information to the bankruptcy judge. Failure to file in a timely manner can have a detrimental effect on your bankruptcy case, and, as a result, the future of your business.

Measuring Major Fluctuations in Your Business
If you’re self-employed, you’re well aware that business comes and goes—especially in this fragile economy that seems to work in fits and starts. But what you may not know is that these income fluctuations can have an impact on your bankruptcy case. This is because the bankruptcy court evaluates your monthly income for the purposes of your case based on the 6 month time period prior to your bankruptcy filing. If you have major income fluctuations during this period, with some inflating your income, it can significantly affect the valuation of your bankruptcy case. As a result, it is crucial you consult with your bankruptcy attorney in order to determine the best timing for your successful bankruptcy filing.

As you can see, bankruptcy cases can be very complex. Especially considering the potential for rules related specifically for self-employed debtors.  A qualified bankruptcy attorney can get to work early, navigate any uncertain waters of bankruptcy court and work in your best interests during the duration of your business and/or personal bankruptcy. The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultationJust call toll free to +1-919-646-2654, or make your own appointment online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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