Experiencing problems with debt and creditors is challenging enough, but things can become more complicated when you are self-employed. In fact, your employment arrangement may have contributed to the situation, as being your own boss can be not as predictable and stable as being a salaried employee.
Filing for bankruptcy is still an available option, but there will be special considerations to ensure the process goes correctly and smoothly. Follow these tips to help you navigate bankruptcy when self-employment is a factor.
Verifying your financial situation
Because you may not have a regular income or may receive various forms of payment, it can take more effort to calculate and provide evidence of your exact earnings. The same goes for showing expenses and investments. It is important to take the time on these steps so you can be precise on your bankruptcy paperwork to avoid penalties for underreporting income or hiding assets. You may need to work with an accountant to ensure accuracy.
Separating personal from business
It is easy for personal and business matters to cross over when you are self-employed. This makes not only paying taxes challenging but also filing for bankruptcy. Keep organized records and avoid commingling to make it easier to differentiate between personal and business finances.
Deciding how to file
The structure of your company, its value and the classification of your assets can affect which chapter you file for and what property is exempt under Tennessee law. For example, if your income is too irregular, a repayment plan under Chapter 13 may not be feasible. If you have a sole proprietorship, you can file under Chapter 7 if you meet the means test. Other options include Chapter 11 and Chapter 12 (for farmers).
Filing for bankruptcy may be more complex when you work for yourself, but it is possible to get through it with the right help. You can get out of debt and start over.