Bankruptcy in the Gig Economy
The world of work has evolved tremendously over the past couple of decades. Thanks to technological advances, a rising number of professionals have moved away from traditional employment towards the so-called “gig economy.” These freelancers, gig workers, and independent contractors have more flexibility but also face unique financial risks. If you are one of them and are considering bankruptcy, this guide is for you. We hope it will help you navigate this complex process and encourage you to seek the expertise of a qualified bankruptcy attorney.
What is Bankruptcy?
Bankruptcy is a legal recourse that allows individuals to eliminate or repay some or all of their debts under the protection of the federal bankruptcy court. For freelancers who are burdened by insurmountable debt, bankruptcy can provide a much-needed fresh financial start. However, the path to bankruptcy is not straightforward, and there are essential factors that freelancers need to consider.
Assessing Your Financial Status
In terms of bankruptcy, freelance workers would need to gather financial documents including 1099 forms, profit and loss statements, and bank statements, among others, to accurately portray their income and expenses.
Chapter 7 bankruptcy, which allows for the discharge of qualifying debts following the liquidation of non-exempt assets, is often the preferred route for gig workers. However, this can be heavily influenced by the individual’s specific circumstances, including the level of their income, the nature and amount of their debts, and the type and value of assets they possess. Therefore, seeking advice from a qualified bankruptcy attorney is crucial to make the most informed decision.
Impact on Business Assets
Freelancers should consider how bankruptcy could impact their business assets. In Chapter 7 bankruptcy, your non-exempt assets will be liquidated to repay creditors. If your “tools of the trade” are necessary for your job, they may be exempt, but this varies state by state.
For freelance workers who rely on their vehicles to deliver goods, such as food or groceries, their cars would qualify as exempt assets, preventing them from being liquidated during Chapter 7 bankruptcy.
Chapter 13 bankruptcy may not be as conducive to a gig worker’s lifestyle, since it is most effective at protecting high-value assets by leveraging the bankruptcy filer’s ongoing income. Since a gig worker’s income can be volating in a gig economy, this may be an unfeasible option.
Navigating Complex Tax Debt Issues
Freelancers often grapple with tax debt issues. Income tax debt may be dischargeable in Chapter 7 bankruptcy if certain conditions are met, such as the tax debt is related to a return filed at least two years before filing for bankruptcy. However, it’s a complex area where professional advice becomes indispensable.
The Need for Professional Assistance
Navigating bankruptcy in the gig economy is a complex process due to irregular income, fluctuating assets, and potential tax debt issues. It’s vital to engage the services of a professional bankruptcy attorney who can guide you through the legal complexities and help you make the best decisions for your financial future. A qualified attorney can assess your unique situation, help you understand the full ramifications of declaring bankruptcy, and guide you through every step of the process.
Bankruptcy is a daunting prospect for anyone, including freelancers. But remember, it’s a tool designed to give you relief from overwhelming debt and provide a fresh start. It’s crucial to get expert advice to navigate this complicated journey. We invite you to complete our bankruptcy evaluation form or call (833) 598-1595 to connect with a qualified bankruptcy attorney who can provide the assistance you need.