Can You File Bankruptcy If You Are Self-Employed in South Carolina?
Yes, you can file for bankruptcy in South Carolina if you are self-employed. Bankruptcy laws in the state allow self-employed individuals to seek relief from overwhelming debt just like traditional employees. However, the process may differ slightly based on your business structure and personal financial situation.
There are two primary types of bankruptcy that self-employed individuals typically consider: Chapter 7 and Chapter 13 bankruptcy.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy, often referred to as "liquidation" bankruptcy, allows individuals to discharge most of their unsecured debts. For self-employed individuals, this can include credit card debt, personal loans, and medical bills. However, it is essential to know that if you own a business, some of your business assets may be subject to liquidation.
To qualify for Chapter 7, you must pass the means test, which compares your income to the median income in South Carolina. If your average monthly income is below the median, you will likely qualify for Chapter 7 bankruptcy.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy, also known as "reorganization" bankruptcy, might be a better option for self-employed individuals with a consistent income. This type allows you to keep your assets while creating a repayment plan to pay off your debts over three to five years.
To qualify for Chapter 13, your secured and unsecured debts must fall below specific limits. As of 2023, your secured debts must be less than $1,395,000 and unsecured debts must be less than $465,275. If you meet these criteria, Chapter 13 can help you manage your debts without losing your business or assets.
Filing Process for Self-Employed Individuals
The bankruptcy filing process for self-employed individuals involves several important steps:
- Gather Financial Documents: Include income statements, tax returns, and details about all debts.
- Choose the Right Bankruptcy Chapter: Based on your financial situation, decide between Chapter 7 or Chapter 13 bankruptcy.
- Complete Required Forms: Fill out the necessary bankruptcy forms specific to your business and personal debts.
- Credit Counseling: Before filing, complete a credit counseling course from an approved provider.
- File Petition: Submit your bankruptcy petition with the local bankruptcy court in South Carolina.
After filing, an automatic stay is issued, which prevents creditors from pursuing repayment. A bankruptcy trustee will be assigned to your case and will review your financial situation.
Considerations for Self-Employed Individuals
If you're self-employed and considering bankruptcy, keep the following in mind:
- You may need to continue operating your business during the bankruptcy process, especially with Chapter 13. Ensure you maintain accurate records of your income and expenses.
- Consult with a bankruptcy attorney who specializes in self-employed cases to navigate complexities specific to your situation.
- Understanding the implications of bankruptcy on your credit score and future lending opportunities is essential.
In conclusion, filing for bankruptcy as a self-employed individual in South Carolina is possible and can provide much-needed relief from financial burdens. By understanding the types of bankruptcy available and the necessary steps, you can make informed decisions to rebuild your financial future.