Working for yourself has many benefits, but drawbacks as well. Personal bankruptcy can be particularly tricky to file when you’re self-employed, though it is possible. Here’s a brief guide to getting it done.

How Does Self-Employment Status Complicate Personal Bankruptcy Filing?

Any individual who files for Chapter 7 or Chapter 13 personal bankruptcy must report and prove their income. While this is a fairly straightforward task for someone who is employed full-time by a company and therefore has easy access to documented payroll information, it can be trickier for an independent contractor or a self-employed person whose monthly income fluctuates.

To determine that you meet the requirements for Chapter 7 or Chapter 13 personal bankruptcy, you must provide proof of income for the six months before filing. Failure to provide this information or providing inaccurate information can result in a dismissal.

How to Verify Your Income

The most important word when it comes to tracking your income as a self-employed individual is diligence. You need to keep records of all income and expenses. However, since you created these records, they must be backed up by official documentation, such as:

• Bank Statements: Use these to verify income via the tracking of deposits. If you bank online, you can usually obtain digital copies of the checks and print them out. Check copies can also be obtained in person at the bank.
• Check Stubs: If you receive paper checks from your clients, always hold onto the stubs. If these cannot be obtained, ask your client if they can provide another proof of payment, such as a receipt, or get in the habit of generating invoices.
• Signed Statements: Cash payments can be tricky to substantiate, so ask your payor for a signed statement verifying the transaction, then attach it to your bank statement.
• Tax Returns: If you have tax returns covering the six months before your bankruptcy filing, they will help provide the bankruptcy court with proof of your income.

If you’re self-employed and need to file for personal bankruptcy, contact Donald L. Spafford, Jr., Attorney at Law, in Honolulu, HI. With more than 30 years of experience, this expert attorney and his team will walk you through the process and help you verify your income so you can attain debt relief. Visit the lawyer’s website for a full list of services, and call (808) 532-6300 to schedule a complimentary consultation today.