QUESTION
If I am self employed, what income will they use for bankruptcy, my 1099 or my income tax return?
Asked on Mar 26th, 2014 on Bankruptcy - New Jersey
More details to this question:
My income on 1099 is around $75,000 but I go in the red almost every year on tax returns. I want to file a complete bankruptcy.
17 ANSWERS
Commercial & Bankruptcy Law Attorney serving Powell, OH
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Ronald K. Nims
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Your income for bankruptcy purposes is your current income, the bankruptcy trustee will use your tax return as an indication of your current income. The bankruptcy trustee will seldom or never see your 1099s - in 20+ years of bankruptcy filings, I've never had a trustee request 1099s.
Answered on Mar 31st, 2014 at 8:52 PM
I would need to see the last six months of paystubs for one form (The Means Test) and current income for schedule I. Contact me for further information regarding filing. 203.870.6700.
Answered on Mar 28th, 2014 at 5:41 AM
Information provided doesn't create an attorney/client privilege nor constitute an offer of services and is only general responses to hypotheticals
2 Awards
You must use your gross income, so the 1099 income.
Answered on Mar 28th, 2014 at 5:40 AM
Your Income Tax Returns. Bottom line is you need to be able to fund a Chapter 13. Do you have any disposable income after all of your monthly living expenses? That will be the issue. If you can not fund a Chapter 13, you are not a candidate for a CH13. It's not rocket science - it is very practical.
Answered on Mar 27th, 2014 at 11:50 AM
General Practice Attorney serving Coeur d'Alene, ID
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Michael B. McFarland, PA
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If you are self-employed, many of your business expenses can be used in the means test to reduce your income. However, due to certain court decisions, it's not as simple as it should be. Consequently, you should consult with an experienced bankruptcy attorney for assistance.
Answered on Mar 27th, 2014 at 11:50 AM
You will need to prepare a profit & loss statement on a month by month basis. Be sure your business expenses do not include any of your home expenses and don't try taking an expense for a home office because it won't fly with the bankruptcy court. Exactly how the numbers will be used will depend on whether you proceed in Chapter 7 or through Chapter 13.
Answered on Mar 27th, 2014 at 11:50 AM
William Rhymer
If you are considering a Chapter 7 fresh start, you can take your gross revenue, subtract your business related expenses, and use your net income before taxes. If you want to do a Chapter 13 pay back plan, a different set of rules apply. I would suggest you talk with a qualified bankruptcy attorney to discover your options.
Answered on Mar 27th, 2014 at 11:30 AM
Bankruptcy Attorney serving Omaha, NE
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Heineman Law Office
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On the Federal Means Test you would use the amount of income that you earned for the six full months prior to the month that you file, but you would also deduct your business expenses as well. From you description of yearly tax returns, you should not give rise to the presumption of being a Chapter 13. The second part of the test is to see if you have anything remaining when you subtract your regular monthly expenses (both business and personal) from your regular monthly income. It sounds like you will be a Chapter 7.
Answered on Mar 27th, 2014 at 11:10 AM
Chapter 7 Bankruptcy Attorney serving Milwaukee, WI
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Law Offices of Deborah A. Stencel
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Your gross income and business expenses will be considered. See an attorney.
Answered on Mar 27th, 2014 at 11:10 AM
The "means test" looks at gross wages but business income is allowed to be offset by ordinary and necessary business expenses, so your net income for the previous 6 months is used. Therefore, it is likely that you would qualify for Chapter 7 which is what I assume you mean by a "complete" bankruptcy. Be aware that the trustee becomes responsible for your business during your bankruptcy so they will expect you to have complete liability coverage if you intend to continue in business after filing your case.
Answered on Mar 27th, 2014 at 11:10 AM
Deborah F. Bowinski
Neither, in all honesty. You will need to calculate your actual cash flow specifically for the last six full months before your case is filed. If you ate self employed I cannot urge you strongly enough to hire a lawyer and not to try to file by yourself. There are many pitfalls!
Answered on Mar 27th, 2014 at 11:09 AM
Appellate Attorney serving Grosse Pointe Farms, MI
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Musilli Brennan Associates, PLLC
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See an attorney and do it correctly.
Answered on Mar 27th, 2014 at 11:09 AM
Creditor's Rights Attorney serving Clayton, MO
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Fluhr & Moore, LLC
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The court uses your actual income.? So in your case, it would be gross receipts minus legitimate business expenses.
Answered on Mar 27th, 2014 at 11:09 AM
Bankruptcy Attorney serving Buford, GA
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Kenneth A. Parker, PC
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In order to file a Chapter 7 Bankruptcy, you must pass the means test. The initial look at the means test is a "Gross" look. This means looking at?your income over the past 6 months without taking any deductions.?If you fail the means test by the "Gross" look, we can take a look at the "Net",?which means we can look at your Gross income and deduct certain items from your Gross income. Since you receive a 1099, we also need to look at bank statements and ask some questions such as do you have a company or are you a 1099 employee?
Answered on Mar 27th, 2014 at 11:08 AM
Bankruptcy Law Attorney serving Livingston, NJ
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Law Office of Stuart M. Nachbar, P.C.
2 Awards
With all due respect, please take your materials, your 1099 and tax returns to your bankruptcy counsel. Income vs Expenses is for the Means Test and the Schedule I and J. While your 1099 Income is 75,000, that clearly means that no taxes are taken out. What about your estimated tax payments? All of these things get taken into account by a good bankruptcy lawyer, so find one in your jurisdiction and get with them.
Answered on Mar 27th, 2014 at 11:05 AM
They will consider your gross adjusted income.
Answered on Mar 27th, 2014 at 11:04 AM
General Law Attorney serving Cherry Hill, NJ
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Mark S. Cherry, Attorney at Law, PC
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The 1099 reflects business income before expenses. Your income is the net profit from the business. You will? have to provide monthly "Profit and Loss" statements as the tax return data is usually stale dated and not the most recent. Be cautious of knowing whether your self-employed?business assets (accounts receivable, equipment) are exempt or not.
Answered on Mar 27th, 2014 at 11:04 AM