How to calculate your income for your bankruptcy forms if you’re self-employed

If you're self-employed, you likely aren't getting regular paycheck stubs to help you figure out your monthly income. This article will provide some tips on how to figure out your income for your bankruptcy forms even without a paycheck stub. 

Your income is calculated differently depending on whether you have a business entity or are a sole proprietor or independent contractor. Let's first take a look at what is considered income depending on how your business is set up and then figure out how to calculate your income for your bankruptcy forms. 

Independent contractors: All funds received from your clients or customers are considered income. 

Gig workers: All funds received from the company (or companies) that you are working for is considered your income. For example, if you're an Uber driver, what you receive from Uber is your income. 

Sole proprietors: All funds received from your clients or customers are considered income. 

Business owners: If you're operating a business that has a separate legal entity, like a corporation or an LLC, there are two things you'll have to look out for. First, whatever money the business pays you for wages or in the form of a draw is considered your income. Secondly, if your business entity is paying some of your personal expenses, that is also considered income. For example, if you're making your car payment using business funds, the car payment is still considered income for the purpose of your bankruptcy filing, even if the money never actually made it into your bank account.  

(1) Means test income

 The good news here is that the income on your Chapter 7 means test form is based on how much you actually earned over the last 6 months. Using the information provided above, go through your records and determine how much money you received during each one of the last 6 months. Remember, the month you file in is not part of this calculation. So, someone filing in July looks at their income from January through June. Once you have your total number, divide it by 6 and you'll have your average monthly income for your means test calculation. 

(2) Your Schedule I 

On Schedule I, you'll need to estimate how much - on average - you'll earn as a self-employed individual every month going forward. If you've been running your business for a while, it's totally ok to figure this out based on how your last 12 months looked. The key for this form is to make sure that you provide the bankruptcy court with a realistic idea of how much you expect to make per month going forward. It doesn't have to be accurate down to the cent (that's really impossible) but do your best to provide an estimate that is as accurate as possible.