TheFloridaBankruptcyLawBlog

Eligibility for Chapter 7 bankruptcy depends upon family income. An employee’s income is usually clearly determined by his payroll statements during the six months prior to filing. A self-employed debtor’s compensation from his own business typically varies month to month and is not cleanly stated on wage statements. Self-employed debtors can control their salary and distributions from their own business. I have been asked several times by self-employed debtors whether they can manipulate their income to make themselves eligible for Chapter 7.

Some people are ineligible for Chapter 7 based upon their income and cannot file Chapter 13 because they have debts above the Chapter 13 ceilings. Many other people are advised by a bankruptcy attorney not to file bankruptcy because they have assets which are not exempt in bankruptcy. I sometimes wonder what happens to people facing judgments who are told by a bankruptcy attorney that they cannot file, or should not file,  bankruptcy. 

A husband and wife consulted with me about a pre-bankruptcy plan. They jointly owned a homestead which had equity. They maintained individual bank accounts and other financial assets. They had over $150k of joint unsecured debt. They wanted to start a new business which would provide their livelihood. The husband was reluctant to file bankruptcy because he may need bank financing; he could obtain financing with his debt level but not with a bankruptcy on his record. 

I often get calls from people who have already filed personal bankruptcy with another attorney and are unhappy about the course of their bankruptcy. Many of these callers find they are losing some money or assets in their bankruptcy, and they complain that their attorney did not warn them that the these assets would be at risk. In most of these situations involve people who, in my opinion, should never have filed bankruptcy.

Many people who file Chapter 7 bankruptcy are self-employed owners of a small business. The business is not doing well, and the owners have accumulated substantial personal debt to support the business and pay personal living expenses while the business could not support them. In many of these bankruptcy situations the debtor would like to keep the business after bankruptcy. They want to know what will happen to their business if they file personal bankruptcy.