How to File Bankruptcy: Proof of Self Employment Income - Westgate Law

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How to File Bankruptcy: Proof of Self Employment Income

Anyone who files bankruptcy must include proof of their income in their filing. Most filers simply submit their pay stubs. According to Section 521 of the Bankruptcy Code, bankruptcy petitioners must send in a minimum of two months of “payment advices” (i.e. pay stubs) received from an “employer.” Bankruptcy petitioners who are self employed often aren’t sure how to obtain “payment advices.” They don’t get pay stubs from an employer. Does this mean that they get a pass? Do they get to skip the requirement?

The quick answer is, no. According to Bankruptcy Rules, Rule 4002 requires that bankruptcy petitioners submit evidence of their current income. Most bankruptcy trustees will feel most comfortable with a “profit and loss.” So if you are filing for bankruptcy and you are self-employed, you need an income statement (or Profit and Loss report) to submit with your bankruptcy petition.

The income statement or profit and loss will be able to show petitioner’s revenue and expenses, money in and out of the business, and what amount is left for you. That part – the part that is left for you is significant in the trustee’s determination of your eligibility for bankruptcy in accordance with the bankruptcy means test.

If you aren’t sure what a “profit and loss” is, you’re not the only one. The term income statement is a bit clearer. Regardless, you need to put together a profit and loss/income statement for each month of the six months preceding that date that you filed for bankruptcy. If you aren’t making a lot of money, it is usually fairly simple.

If you have an accountant or if you keep track of your finances in Quicken, you’ve got it covered. Otherwise, you may need to set aside some time to put together the document. The easiest way to get started if you aren’t going through a software program that already holds your financial information or an accountant, pull up examples of profit and loss reports for other companies online and find one that you can use as a template for your own.

If you are still confused about the Profit and Loss report as proof of income for your bankruptcy filing or if you have other questions about how to file for bankruptcy, please get in touch with the southern California bankruptcy attorneys at Westgate Law.

About the Author

Justin Harelik

Justin has a singular goal: to get people out of financial distress and move them to financial stability and prosperity. He does this by combining 15 years of in-depth experience in bankruptcy, credit management, debt negotiation and student loan modifications, and he does it with both English and Spanish-speaking clients.

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