There are so many rewards of being self-employed that individuals who set it as a goal often forget or dismiss the downsides. Just as applying for a mortgage is more complex when you don’t have a W-2 to prove your income, the same is true for a bankruptcy filing. If you’re self-employed and you’ve found yourself pondering a Chapter 7 or Chapter 13 filing, there are special considerations you’ll have to weigh, particularly surrounding income verification and asset valuation.

When you’re self-employed, you’re responsible for your own financial records, accounts payables and receivables, and tax payments. Though entrepreneurs are incessantly advised to keep their business finances separate from the personal, it is easy to blend the two, and this can complicate the documentation process when it comes to a bankruptcy filing.

Whether you pursue a Chapter 13 bankruptcy that lets you keep your assets while you repay your reorganized debts or a Chapter 7 bankruptcy that involves liquidating non-exempt assets to repay creditors, you’ll need to document your income. This means collecting at least 6-12 months of bank statements to show deposits related to business income; copies of invoices, client contracts, and payment receipts; two years of up-to-date tax returns; profit and loss statements showing income, expenses, and net profits; and a cash flow statement.

This is a level of documentation and financial tracking that many self-employed business owners may not have, but taking the time to gather, organize, and put this information down on paper will make a significant difference to their filing being successful. The bankruptcy court will also expect a comprehensive asset evaluation that includes the value of your home and real estate, vehicles, and other personal property as well as business assets including equipment and tools, inventory, accounts receivable, and intellectual property.

Working with an experienced bankruptcy attorney will make all the difference in your ability to navigate this path with confidence. They can guide you through decisions on exemptions, help you arrange for mandatory credit counseling, prepare and file your petition and all the needed forms, and even counsel you on the best steps for rebuilding your credit.

Filing for bankruptcy carries many additional impacts for the self-employed. Make sure that you’re well prepared and understand what lies ahead by working with our experienced bankruptcy attorneys before you begin the process.