When you own your own business, you may be fearful that the bankruptcy process will be much too difficult to complete. While the process of filing for bankruptcy when you are self-employed is much the same as if you worked for a company, you must complete the means test, which can be somewhat of a challenge for those who are self-employed.
After the 2005 changes to bankruptcy code, many were left wondering what this would mean for their Chapter 7 and Chapter 13 bankruptcy eligibility. The means test was a way to ensure only those who truly could not pay their bills were able to file. This takes a more in-depth look at your disposable income to see if you meet the threshold for bankruptcy.
So what all is involved in the means test? There are a few ways to determine your disposable income threshold in Ohio.
First, you will have to take a look at your monthly income. If you fall below the median monthly income, you are most likely going to qualify for Chapter 7 bankruptcy. However, your median monthly income is also influenced by the number of people who live in the house.
Now, let’s say you are above the monthly, median income in Ohio. This doesn’t mean you won’t qualify for bankruptcy, it just gets complicated, which is where the disposable income comes in.
Items included in this calculator typically involve household expenses like housing, transportation, food, and utilities. However, you can take a look at all of the categories on Chapter 7 Bankruptcy forms 22A and 22C.
From there, you will take those monthly expenses, and see what your true disposable income is. If your income is still too high, then you most likely will not qualify for Chapter 7 bankruptcy but may qualify for Chapter 13.
If you are self-employed, the means test will be incredibly important to your bankruptcy case.
You will need to provide documents of income and any supporting documents like pay stubs, bank statements, tax returns, invoices, and contracts.
If you are the sole owner of the business, both your personal and business debts may be combined, which means both debts may be discharged.
While Chapter 7 bankruptcy may be the best choice, remember that some assets may be sold. However, in Chapter 13, you would be on a payment plan for your debts, which means you can keep your business running as usual. Just remember, if you are falling behind on your payments, you need to talk to your attorney about a modification plan.
When you are self-employed, it may feel like the weight of the world is on your shoulders. But it doesn’t have to be. Contact a trusted bankruptcy lawyer in Columbus, Ohio today.
If you are experiencing financial distress or the burden of debts you cannot pay, we encourage you to contact The Jones Law Firm for a free consultation about how we can help you decide what is right for you. With our office located in Reynoldsburg, Ohio, The Jones Law Firm works with clients in and around Columbus and throughout central Ohio. Don’t delay. Your financial future begins now.