A requirement under the Bankruptcy Code is that you provide copies of all pay advices or other evidence of payment received within 60 days of your filing for bankruptcy. For most people who go to work every day and receive a paycheck, this is not a big hurdle. However, if you are self-employed, how do you meet this requirement?
Fortunately, for the self-employed who operate as a proprietorship, the Code does not require you to provide evidence of payment where none existed prior to your filing for bankruptcy. For example, if you operate a landscaping business and receive a lot of checks from your customers as they pay, you do not need to present copies of all of those checks.
However, if you are “self-employed” by a subchapter S corporation or other corporate entity, you will be required to furnish evidence of income that you received from the corporation employer. If you write a check from your business account to yourself, because the check will be returned to the corporation, the corporation can be expected to make copies available for a bankrutpcy filing–particularly if the sole shareholder of the corporation is the bankruptcy debtor.
A further issue for the self-employed is how to document their income for the means test? Generally, the courts will accept whatever accounting methods that you use. For example, one client of mine was a dog groomer and the only evidence of income was her appointment book. She charged a certain amount per dog and we could calculate her income based on the appointments in her book.
As you contemplate a bankruptcy filing and start gathering the documentation necessary for such filing, it is important to be sure that you obtain sufficient documentation as to your income including all of your “payment advices” so this information can be provided to the appropriate official as required under the Code.
Adrian Lapas, Esq.
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Last modified: May 15, 2009