Bankruptcy Blog

Published in Bankruptcy Blog

Filing bankruptcy is possible if you are self-employed.  In fact, the process and rules are the same for people who are self-employed versus those who work for a business or someone else.  The circumstance that may be more cumbersome, however, is proving your income for the previous six months. 

Recordkeeping is a lot of work, and many people do not keep documents orderly.  However, in order to file bankruptcy under Chapter 7 or Chapter 13, you must prove your income for the last six months.  So, you must get as many documents as possible together to prove the income.  Documents that are acceptable to prove your income include check stubs or copies of checks paid to you, signed receipts or statements from the payer for cash you received, bank statements that show deposits, invoices for your business, signed contracts for your business, and your tax returns if they include some or all of the last six months of income.  An inability to prove income will result in a bankruptcy case dismissal. 

Proof of income will be especially important in a Chapter 13 case, under which a plan is determined for a modified payment schedule.  Relationships with creditors are preserved under this type of bankruptcy filing, and that is important to continue to build your business.
 
Published in Bankruptcy Blog
A non-dischargable debt is one in which Congress has determined that the debtor must pay and may not be forgiven, or "discharged", during the bankruptcy process.  Bankruptcy filed under chapters 7, 11, 12, and 13 each prohibit certain types of debt from being discharged.  Depending on the chapter in which bankruptcy is filed, the types of debts that are dischargable vs. non-dischargable vary.  For example, chapter 13 allows a more broad set of dischargable debts than chapter 7 bankruptcy. 

The most common types of debt that cannot be discharged are child support; spousal alimony; debt to the government including student loans, tax bills, and penalties; some housing or condo fees; debts owed to someone because of a injury caused by drunk driving or cruel actions; some retirement plan debts; and debts incurred due to divorce. 

Creditors may oppose the discharge of some debts during the bankruptcy process, and he must prove that the person or process has been violated to get a supportive ruling for disallowing the discharge.  The opposition filing must meet the court's deadlines.

A discharge may be revoked if the trustee or creditor proves that the debtor obtained the discharge under fraudulent circumstances.  The court would review the claim and circumstances to determine if there is a justified reason for the revocation of the discharge. 

Bankruptcy is a way to start fresh from overwhelming debt, but it is not a method to get rid of all debts. 

 

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