Self employment brings many difficulties since in many ways you are running a business. At the same time, areas such as with banking and in purchasing materials, you are treated as a consumer and not as a business. When it comes to bankruptcy, the waters can become ever murkier.
Part of the documentation required for a successful bankruptcy petition includes income proof from the previous six month. I don’t know of any self employed person who issues themselves payslips. There are alternatives and these include bank statements and profit and loss statements for the six months prior to filing for bankruptcy.
It is also important to have all your tax records, particularly your previous years’ assessment. All bankruptcy petitions require up to date tax returns and this includes small businesses, sole traders, and self employed persons.
Where complications do set in for self employed persons is where Chapter 7 relief is sought. The trustee will seize assets above exempt limits so this can result in a vehicle being seized and sold, even though it is an essential component of the business. Tools of the trade that exceed the exempt limits may also be seized and sold. This can make the continuation of self employment extremely difficult.
If you are self employed, you really do need to seek the advice of an experienced bankruptcy lawyer. They may be able to help you work through a Chapter 13 petition rather than a Chapter 7 petition. You will then be able to keep all of your assets, however, you will need to make monthly payments for the next three to five years to satisfy the Chapter 13 requirements. You need to balance the value of your self employment and your assets against the value of the repayment arrangements. Bankruptcy for the self employed can be tricky. Seek advice from those trained to provide it – a bankruptcy lawyer.