Bankruptcy and Self Employment in Arizona
Self-employed individuals like those who run a homebased business and freelance service providers often worry how to address financial troubles and whether a bankruptcy filing is a simple and effective option.
The method of doing work also raises some questions. If you feel the need to do a bankruptcy filing, you should certainly move forward with it. An Arizona bankruptcy attorney will guide you through the process and give you a better idea about the specifics pertaining to the way in which you earn income.
Can You Do a Bankruptcy Filing as a Self-Employed Individual?
Let’s answer the most important question first – can you do a bankruptcy filing as a self-employed individual?
The short answer is yes.
The long answer is a bit more complicated. Usually, there’s no distinction between personal and business assets when people are self-employed. This lack of distinction can complicate things.
If you opt for a Chapter 7 filing, asset liquidation may affect a bit more than your personal assets. If you have personal assets that you need to do your job or run your business, you could run in a bit of trouble. Hence, you have to understand Arizona bankruptcy exemptions and liquidation rules before moving forward with the filing.
Solid Documentation Is Required!
Whether you plan to go through a Chapter 7 or a Chapter 13 filing, you will need solid documentation.
For a start, you will have to provide information about your income. Anyone running a professional business should be meticulous in terms of bookkeeping and this financial data can come in handy during a bankruptcy filing.
Bank statements, invoices, deposits of checks and cash can all help determine the type of bankruptcy you qualify for. This information will also be used to calculate Chapter 13 payments if this is the option you go for.
You can also get signed statements from your clients if your bank statements don’t cover all of the funds you’ve received.
Income verification covers the six months prior to the filing. As a self-employed individual or a freelancer, you could find it difficult to establish a solid monthly income. Understand the fact, however, that a mistake could make you ineligible for a Chapter 7 filing. Alternatively, your bankruptcy request could be dismissed without getting a discharged because of a failure to verify all of your income.
Can You Continue Working?
Because the distinction between personal and professional assets is difficult to make, many freelancers and self-employed individuals wonder whether they’ll be free to continue working during the bankruptcy filing.
A personal filing, whether under Chapter 7 or 13 does not stand in the way of continuing to run your business and generate revenue.
In fact, working will be essential for maintaining your financial stability, especially if you’re going through a Chapter 13 filing.
The only problem you may run into is asset liquidation that impacts your ability to do your job. If this is the case, you should once again plan in advance to make sure you can continue providing services or selling products even after the filing.
Get Professional Assistance
As you’ve already gathered, income verification is the most challenging aspect of doing a bankruptcy filing as a freelancer or a self-employed individual.
Professional assistance will simplify the process.
Talk to an Arizona bankruptcy attorney and an experienced accountant. If you already outsource bookkeeping to an accounting firm, these professionals will be capable of collaborating with your lawyer to ensure accurate income calculation.
A bankruptcy filing will help you move forward if you’re struggling under the burden of debt. You can file as a self-employed individual but unlike employed individuals who get records from the company they work in, you’ll be entirely responsible for the provision of all the required documentation.
Find out are retirement accounts protected from bankruptcy in Arizona.