Financial hardship can affect anyone, including small business owners, sole proprietors, freelancers, and independent contractors. If you are self-employed and are struggling with overwhelming debt, you may be wondering whether you can file for bankruptcy and if it’s an option for you. Understanding your legal rights and options during this time is crucial to protect your financial future. Continue reading and contact a skilled Louisville, Kentucky business bankruptcy lawyer today.
What Does it Mean to Be Self-Employed?
When a person is self-employed, it generally means that they work for themselves rather than earn wages as a traditional employee. Common examples of individuals who are self-employed include:
- Freelancers
- Independent contractors
- Gig workers
- Sole proprietors
- Consultants
- Real estate agents
- Small business owners
- Tradespeople
- Contractors
Self-employment income may come from cash payments, 1099 forms, client invoices, online payment platforms, and business revenue.
It’s worth noting that owning a business does not necessarily automatically make someone self-employed. Some business owners still receive W-2 wages through a corporation or LLC. Sole proprietors and single-member LLC owners are more commonly treated as self-employed individuals.
Can I File for Bankruptcy if I’m Self-Employed in KY?
Yes, you can file for bankruptcy if you’re self-employed. Federal bankruptcy law generally provides self-employed individuals with the same bankruptcy protections available to traditional employees. Self-employment alone will not prevent someone from qualifying for Chapter 7 or Chapter 13 bankruptcy.
How Does Self-Employment Complicate Bankruptcy Proceedings?
While self-employed individuals can file for bankruptcy, sometimes it is not as straightforward. Self-employed income is often inconsistent or seasonal, and business expenses may reduce net income significantly. Business assets and personal assets also often overlap, especially in sole proprietorships.
Courts and trustees may require additional documentation to verify income and expenses. When filing for bankruptcy, self-employed people should keep the following documents:
- Tax returns
- Profit and loss statements
- Bank statements
- Client invoices
- Business expense records
- Payroll records, if there are any employees
- Business licenses and formation records
Can I Keep My Business After Filing for Bankruptcy?
Filing for bankruptcy will not necessarily force a self-employed person to shut down their business. Many individuals are able to continue operating during and after bankruptcy. The outcome often depends on the business structure, profitability, debt type, whether you file Chapter 7 or Chapter 13 bankruptcy, and the value of your assets.
If you have questions or concerns about whether you can file for bankruptcy as a self-employed person, do not hesitate to contact an experienced attorney at Schwartz Bankruptcy Law Center today.
