Having your own business can be incredibly satisfying. You work for yourself and know actual profit your business makes. However, it can also be incredibly expensive — you have to pay office rent, staff costs, advertising and bear other overhanging expenses to keep your service running. Add to that some months when possibly your earnings really did not surpass your expenses, and you’re facing an enormous amount of debt. When you need some financial support to let your business survive and prosper, it might be time to start thinking about filing for bankruptcy.
The Means Test
If you are self-employed, you are still able to apply for Chapter 7 or Chapter 13 bankruptcy, similar to any other person. Nevertheless, it may be a little harder to provide your earnings according to the means test. This examination is performed by the bankruptcy court to determine if you qualify to file for bankruptcy and, if so, which chapter you are qualified to file. If your revenue drops below average Tennessee family income, you automatically get approved for personal bankruptcy and you do not even should take the means test.
For those that do have to take the means test, you should average out your income for the half-year to find out your typical monthly income. From your earnings, you can deduct your regular monthly debts, like your car loan, home mortgage, medical bills as well as various other expenses, after which you get your disposable income. In general, the more disposable income you have, the less chances you have to qualify for bankruptcy.
For independent individuals, the means test is a bit harder as you do not get a paycheck. Consequently, you have to count on a different technique to prove your income. For instance, your tax return as well as deposits made in your bank accounts may help you with that.
Bankruptcy for Sole Proprietors
As a sole proprietor, your business and also personal debts are urged, so applying for personal bankruptcy implies you need to provide both individual and company income and debts. If you qualify for Chapter 7, your discharge can remove both individual and also business-related debts. Chapter 7 can additionally be an excellent option if you do not have a lot of nonexempt properties to sell since after that you won’t lose many assets. On the other hand, having a lot of nonexempt properties implies you might shed a lot of them, since your trustee will need to sell them to pay some of your debt.
Chapter 13 can be a good option for a sole proprietor due to the fact that it likely won’t cause much disturbance in your company. Since you do not have to sell any possessions that can be important to your business, you will be able to make monthly repayments without holding up operations. Yet it is very important to guarantee you have adequate amount of to make your payments and still cover business expenses. Falling behind on your Chapter 13 payment plan puts you in danger of having your personal bankruptcy dismissed, leaving you back in the financial difficulty you previously experienced.
You just started your own business and accumulated more debt than you can afford to pay off? The best solution is to reach out to an experienced attorney. The attorneys at Conner & Roberts can go over the different chapters of consumer bankruptcy and help you determine what debt relief option will work best for your personal and professional life. Contact us today!