Self-employment may be substantially rewarding. It may also require significant resources of time and, of course, money. The responsibility of meeting payroll, marketing, insurance, and other overhead costs may cause financial burdens down the road for any business, Also, any month that results in greater expenses than income, i.e., little or no profit, will cause debt to mount and become burdensome quickly. However, filing bankruptcy is always an option for anyone, especially someone self-employed. To determine all options for filing bankruptcy as a self-employed business owner, contact the seasoned attorneys at the Morrison Law Group.
For self-employed business owners who are sole proprietors, a distinct advantage may exist when filing bankruptcy. In this case, the business is not a separate legal organization or entity, therefore, it may not file bankruptcy as a separate body, like a corporation. Instead, a sole proprietor must file a personal bankruptcy case. The major advantage is that if most of the debts come from the business, the potential filer will be eligible to file Chapter 7 bankruptcy without having to pass the Means Test. The Means Test only applies to debtors whose debts are primarily consumer debts.
Otherwise, a self-employed debtor must complete the Means Test. In this circumstance, monthly income is determined by averaging income for the prior six months. If this income amount is at or below the Utah median threshold, the business owner is eligible to file a Chapter 7 case. If not, monthly expenses, including those for a mortgage, taxes, and car payment may be deducted to establish the amount of disposable income. The less disposable income that a prospective self-employed business owner has, the more likely it is that he or she qualifies to file a Chapter 7 case.
Once, a self-employed debtor establishes the eligibility to file, it may discharge both personal and business-related debts. At this time, a Chapter 7 bankruptcy case filing where a debtor has few nonexempt business assets (most business assets are nonexempt), may result in the loss of little property. In contrast, the presence of a substantial amount of non-exempt assets typically means that the trustee will liquidate them to pay business creditors.
For sole proprietor debtors who wish and have the capacity to remain in business, a Chapter 13 bankruptcy case filing may be a good option since it may not significantly disrupt business or result in the liquidation of business assets that are crucial to the business and necessary for operation. Chapter 13 allows self-employed debtors to reorganize by making monthly debt payments while continuing to operate.
Theron Morrison has helped 8,000 people file bankruptcy and gain a fresh start. Call 801.456.9933 to schedule a FREE consultation. We have locations in Ogden, Logan, Sandy, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.
