1 minute read

How To Calculate Your Income If You’re Self-employed

Upsolve is a nonprofit tool that helps you file bankruptcy for free. Think TurboTax for bankruptcy. Get free education, customer support, and community. Featured in Forbes 4x and funded by institutions like Harvard University so we'll never ask you for a credit card. Explore our free tool


In a Nutshell

If you're self-employed, you likely aren't getting regular paycheck stubs to help you figure out your monthly income. This article will provide some tips on how to figure out your income for your bankruptcy forms even without a paycheck stub. Your income is calculated differently depending on whether you have a business entity or are a sole proprietor or independent contractor. Let's first take a look at what is considered income depending on how your business is set up and then figure out how to calculate your income for your bankruptcy forms.

Written by Attorney Andrea Wimmer.  
Updated September 4, 2020


If you're self-employed, you likely aren't getting regular paycheck stubs to help you figure out your monthly income. This article will provide some tips on how to figure out your income for your bankruptcy forms even without a paycheck stub. 

Your income is calculated differently depending on whether you have a business entity or are a sole proprietor or independent contractor. Let's first take a look at what is considered income depending on how your business is set up and then figure out how to calculate your income for your bankruptcy forms

Independent contractors: All funds received from your clients or customers are considered income. 

Gig workers: All funds received from the company (or companies) that you are working for is considered your income. For example, if you're an Uber driver, what you receive from Uber is your income. 

Sole proprietors: All funds received from your clients or customers are considered income. 

Business owners: If you're operating a business that has a separate legal entity, like a corporation or an LLC, there are two things you'll have to look out for. First, whatever money the business pays you for wages or in the form of a draw is considered your income. Secondly, if your business entity is paying some of your personal expenses, that is also considered income. For example, if you're making your car payment using business funds, the car payment is still considered income for the purpose of your bankruptcy filing, even if the money never actually made it into your bank account. 

(1) Means test income

The good news here is that the income on your Chapter 7 means test form is based on how much you actually earned over the last 6 months. Using the information provided above, go through your records and determine how much money you received during each one of the last 6 months. Remember, the month you file in is not part of this calculation. So, someone filing in July looks at their income from January through June. Once you have your total number, divide it by 6 and you'll have your average monthly income for your means test calculation. 

(2) Your Schedule I 

On Schedule I, you'll need to estimate how much - on average - you'll earn as a self-employed individual every month going forward. If you've been running your business for a while, it's totally ok to figure this out based on how your last 12 months looked. The key for this form is to make sure that you provide the bankruptcy court with a realistic idea of how much you expect to make per month going forward. It doesn't have to be accurate down to the cent (that's really impossible) but do your best to provide an estimate that is as accurate as possible.



Written By:

Attorney Andrea Wimmer

TwitterLinkedIn

Andrea practiced exclusively as a bankruptcy attorney in consumer Chapter 7 and Chapter 13 cases for more than 10 years before joining Upsolve, first as a contributing writer and editor and ultimately joining the team full time in August 2019. While in private practice, Andrea ha... read more about Attorney Andrea Wimmer

It's easy to get help

Choose one of the options below to get assistance with your bankruptcy:

Free Web App

Take our screener or read our bankruptcy F.A.Q. to see if Upsolve is right for you.

Take Screener
5,435 families have filed with Upsolve! ☆
or

Private Attorney

Get a free bankruptcy evaluation from an independent law firm.

Find Attorney

Bankruptcy Learning Center

Research and understand your options with our articles and guides.

Go to Learning Center →

Already an Upsolve user?

Read Support Articles →

Upsolve is a 501(c)(3) nonprofit that started in 2016. Our mission is to help low-income families who cannot afford lawyers file bankruptcy for free, using an online web app. Spun out of Harvard Law School, our team includes lawyers, engineers, and judges. We have world-class funders that include the U.S. government, former Google CEO Eric Schmidt, and leading foundations. It's one of the greatest civil rights injustices of our time that low-income families can’t access their basic rights when they can’t afford to pay for help. Combining direct services and advocacy, we’re fighting this injustice.

To learn more, read why we started Upsolve in 2016, our reviews from past users, and our press coverage from places like the New York Times and Wall Street Journal.

Close

Considering Bankruptcy?

Try our 100% free tool that thousands of low-income families across the country have used to file bankruptcy themselves. We are funded by Harvard University, will never ask you for a credit card, and you can stop at any time.

File Bankruptcy for Free