Yes, being self employed does not disqualify you from filing a Chapter 13 repayment plan. Be aware, however, that Chapter 13 is designed for salaried employees (“wage earners”) so cases filed by a small business owner, a commissioned sales person, a 1099 contractor or anyone else who does not get a W-2 at the end of the year will be more difficult.
Chapter 13 functions as a payment plan that is designed to last three to five years (with most cases lasting 5 years). This means that the budget you file and repayment plan you submit assume that your income and expenses will be mostly the same month after month.
If, for example, you propose a repayment plan that obligates you to pay $1,000 per month to the trustee, but you have a bad month or two because your truck broke down or because you had no sales, or because you were sick, your case could be at risk for dismissal for non-payment.
Your attorney can file a motion to suspend payments for a month or two but this will add to your legal costs and the judge may not approve repeated requests for payment suspensions.
Further, when you file your case, you will be asked to provide documentation showing funds coming in and expenses going out. Assuming you have this documentation, what you earned or spent 2, 6 or 10 months ago may not be applicable today but the trustee will use prior numbers to estimate your current budget.
Often, we get the best results for the self employed if your plan provides for a 100% payment of all creditors.
So, if you are not a W-2 employee and you need to file a Chapter 13 to stop a foreclosure or repossession or simply to reorganize, be prepared to gather a lot of documentation and to enter an environment where the Chapter 13 trustee assumes that you are earning or have the capacity to earn more than you may actually be earning.
