Submitted by Rachel R on Fri, 07/18/2014 - 1:26pm
Self-employed people have special bankruptcy concerns
If you work for yourself either as an entrepreneur, sole proprietor, freelancer or any other arrangements where you're not drawing a standard paycheck from an employer that withholds taxes, you'll need to do a little more prep work before you file bankruptcy. When self-employed consumers come in to talk to us about debt relief, the first thing we have to assess what your income, debts and assets are. For those who work for an employer, they bring in recent paystubs, bank statements and copies of bills. But for those that are self-employed, there is a little more to it.
What Is Evidence of Current Income If You're Self-Employed?
Bankruptcy Rule 4002 requires that every bankruptcy filer submit evidence of their current income. If you don't have wage statements and pay stubs because you work for yourself, you'll have to present a profit and loss statement. This sounds more complicated than it is. It's just a sheet that shows how much you earned in your business versus what your expenses were to do that business. The profit and loss statement doesn't include any personal expenses.
If you clean houses for a living, you list the money you were paid by customers as income then deduct your business expenses. This can include cost of cleaning supplies, paper towels, costs of advertising, costs of fuel and vehicle maintenance to drive to your clients' homes, uniform cost and other direct costs of running your business. If your cell phone is used 50% for business, you can add that to your expenses as well. If you have a home office, you may be able to deduct part of your rent and utilities.
What Do I Have to Do to Show How Much You're Earning While Self-Employed?
The difference between how much you earned and the expenses it cost to earn that money is your profit or loss for the business. When you come in to see us, you should bring your bank statement that shows where you deposited cash or checks you received or a log where you recorded amounts received if you didn't deposit them into the bank. Receipts for your business expenses should also be submitted to substantiate your claims.
You'll have to do one monthly statement for each of the six months prior to the filing date of your bankruptcy. Click here for a sample profit and loss statement to guide you. This needn't be overly complex so long as it's accurate. If you employ any people, their pay should be deducted. For instance, if you paint houses and you use a guy to help now and then, what you pay him is a business expense. If you're not sure if something is a business expense or not, bring in your receipts and we can help you figure it out.
Contact Our Offices for a Free Consultation on Bankruptcy for the Self-Employed
If you're not sure what you need to do to prepare for a bankruptcy filing if you're self-employed, call our offices and one of the North Carolina bankruptcy professionals at the law offices of John T Orcutt will make you an appointment for a free consultation and advise what documentation you need to bring. This will make sure we have all the information we need to give you accurate advice on the best strategy to get you the financial fresh start you deserve.
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