Chapter 13 for Self-Employed and Gig Workers?

At our Memphis bankruptcy firm, we face this question all the time: “Can I file Chapter 13 if I’m self-employed or a gig worker?”

If you’re self-employed or working as a freelancer, contractor, or gig worker, you might think bankruptcy isn’t an option for you. Maybe your income isn’t steady month to month, or you worry that the court won’t understand your work situation.

The truth is, you can absolutely file for Chapter 13 bankruptcy as a self-employed person — and for many gig workers, it’s a smart way to reorganize debt while keeping your business running.

Here’s how it works.

Why Chapter 13 Might Be a Better Fit Than Chapter 7

For many self-employed people, Chapter 13 offers more protection than Chapter 7. Since Chapter 7 involves liquidation, it could potentially put your business assets at risk.

Chapter 13, on the other hand, allows you to reorganize your debt while keeping control of your property and business.

It’s also a good option if your income is too high to qualify for Chapter 7 or if you want to protect co-signers on certain debts.

You Don’t Need a Traditional Job to Qualify

To file Chapter 13, you don’t have to prove some sort of specific type of employment. You just need to show that you have regular income.

That income doesn’t have to come from a traditional paycheck. Income from self-employment, freelance projects, tips, or even a small business can all count. The court simply needs to see that you make enough to cover your living expenses and your proposed repayment plan.

If your income fluctuates but averages out steadily, our bankruptcy attorneys will look at how/whether we can show an average monthly income using tax returns, invoices, bank statements, or profit-and-loss records.

And if you have questions about how your income might affect whether you qualify, we’re happy to answer your questions, free of charge.

Chapter 13 and Running Your Self-Employed or Gig Business

If you file Chapter 13 bankruptcy, you don’t have to shut down your company or stop working for yourself. Instead, you’ll continue operating as usual while making your monthly payments through your repayment plan.

You’ll also be able to keep tools, equipment, or supplies that are necessary for your work.

In addition, Chapter 13 stops foreclosure and repossession. So if you use your home or personal car as part of your work, Chapter 13 will protect these assets.

Providing Documentation of Your Income and Expenses

Because self-employment income isn’t as simple as a W-2 paycheck, the court and your bankruptcy trustee will need clear documentation of your business finances. This may include:

  • Recent tax returns
  • Bank statements showing deposits
  • Records of invoices or payments from clients
  • A simple monthly profit-and-loss statement

Don’t worry, you don’t need to be an accountant to get through this. A good bankruptcy lawyer can help you organize these records in a way that clearly shows your financial situation.

What About Irregular Income?

Many gig workers worry that their income changes too much for Chapter 13 to work. The truth is, bankruptcy courts understand that self-employed people often have variable income. Your repayment plan will be based on your average earnings.

Fortunately, we also always look at these issues well in advance of working with the courts. If we notice any concerns at all that you might not qualify for Chapter 13, we’ll have that conversation at your initial consultation. So you’ll know, at no charge, exactly what options you have.

bankruptcy lawyer Memphis, TNHelp with Chapter 13 If You’re Self-Employed

Running your own business takes courage, and we understand how stressful it can be when financial challenges pile up. Our firm has helped many self-employed and gig workers file for Chapter 13, get protection from creditors, and keep their businesses thriving.

If you’re self-employed and considering Chapter 13 bankruptcy, contact us today. We’ll listen to your situation, explain your options, and help you take back control of your financial future with our award-winning compassion and care.