How Self-Employment Affects Your Chapter 13 Bankruptcy

If you are self-employed and are still bringing in a substantial income, Chapter 13 bankruptcy might be an option for you. You will still need to prove that you have a regular income or your bankruptcy might be converted to a Chapter 7 bankruptcy and your assets might be liquidated. 

How to Know if You Qualify for Chapter 13

With a Chapter 13 plan, you will want your income and expenses to be consistent. Your regular payments will be consistent and will be based on what the court believes you can afford. You will need to file information and the trustee will verify all the information you submit. This is to make sure that all of your disposable income is being contributed to the plan.

The judge will modify the rights of your creditors during Chapter 13. It must also meet the requirements under the bankruptcy code. When your creditors receive a copy of your plan, they will be able to raise objections to it. 

This is more likely to occur if you're self-employed because your income will go up or down from month to month, and you will also have different expenses. The trustee might think that your estimate of your income is too low and that you will need to pay the creditors more each month.

Evidence You Might Need to Provide

If you are a truck driver, you may need to provide receipts to prove that you are spending money to repair your truck. You may need proof of expenses, proof of tax escrow, and any weigh station tickets you need to pay. 

You will need a bankruptcy lawyer to assist you in arguing with the trustee if you are filing as a self-employed worker because the trustee can be surprisingly unreasonable in some cases. For example, even if you are working as an independent contractor for a different trucking company, the trustee might expect you to use records from your time spent at the truck company you previously worked for.

When You Can't Afford the Monthly Payment

When self-employed, you may find that your expenses and income change with time. Then, you will need to file an amended plan with the court to have your monthly payment reduced. 

However, the process of amending the payment plan can be expensive and the process is more complicated. Therefore, it is important to know what to expect when you file for Chapter 13 when self-employed by consulting with a bankruptcy lawyer beforehand.

If you have bankruptcy questions, contact a local bankruptcy attorney.