I’m self-employed and want to file bankruptcy. What do I need to know?


Whether you file a Chapter 7 or a Chapter 13 bankruptcy you will be required to produce your “payment advices” for the six month period prior to the month you file your bankruptcy. Payment advices is the bankruptcy court’s term of art for documents that show your income. For those who receive a paycheck it means the check stub that shows their gross and net income. But you are self-employed, you don’t receive a check stub.

You will be required to produce Profit and Loss Statements (P&L) for each of the six months prior to the month your bankruptcy case is filed. If you use Quick books you can easily generate P&L statements for the court.

But what if you do not use Quickbooks. For example, say you are a self-employed gardener, you get paid in cash, and your profit is what you have left over after you pay your helpers, your gas and your tools. You can still file bankruptcy. You are going to have to reconstruct the financial picture of each month to the best of your ability. Hopefully, you kept good notes about the addresses you worked and how much you were paid. And you kept receipts.

You will be asked to produce bank statements, usually for the three months prior to and including the month in which you file bankruptcy.

In a Chapter 7 bankruptcy you will be required to produce your last year’s tax return. In a Chapter 13 bankruptcy you will also be required to attest to the fact that you filed the prior four years of tax returns.

The bankruptcy trustee may look at the P&L statements, the tax return and the bank statements to see that they are consistent. The bankruptcy trustee can also request more information.

When you file bankruptcy you will be signing a sworn statement that the information you provide is true and correct subject to the penalty of perjury. So it is important that you give your attorney accurate and complete information. In this way you case will progress smoothly through the court system. Your attorney is there to help you work through them if problems arise.