Yes, you can file personal bankruptcy in Florida when you are self-employed. Freelancers, gig workers, contractors, and sole proprietors file Chapter 7 or Chapter 13 all the time. The main differences are in the details. Your income is measured after ordinary business expenses, your business property may count as your personal property, and a Chapter 13 plan can let you keep running your business while you repay creditors (11 U.S.C. 1304(b)). How your business is set up, as a sole proprietorship, an LLC, or a corporation, makes a big difference in what bankruptcy can and cannot do.
Being your own boss has real rewards, but it also means your income can swing from month to month, and business debts can blur into personal ones. A slow season, a lost client, or an unexpected tax bill can leave a self-employed person buried in debt. If that is where you are, you may be worried that filing bankruptcy means shutting down the work you built. In many cases it does not. This article explains how bankruptcy works for self-employed Floridians and what to think about before you file.
Yes. The way your business is organized shapes how bankruptcy treats it.
Many small business owners personally guarantee loans, leases, or credit cards for their company. Those personal guarantees are your debts, and they can be part of your personal bankruptcy even when the business itself is a separate entity.
For the Chapter 7 means test, your current monthly income is generally your average income over the six months before filing (11 U.S.C. 101(10A)). For a self-employed person, that means business gross receipts minus ordinary and necessary business expenses, not your gross sales. This matters because irregular income can make one month look much better or worse than reality. Accurate records of income and expenses help make sure the number reflects your true situation. Our guide on qualifying for Chapter 7 in Florida walks through how the means test works.
There is another detail worth knowing. The means test applies to filers whose debts are primarily consumer debts (11 U.S.C. 707(b)(1)). If most of your debt comes from operating a business, the means test may not apply to you at all. Whether your debts are primarily business or consumer depends on your specific mix of debts, so this is a question for your attorney.
In Chapter 7 bankruptcy, qualifying debts are discharged in a few months, but a trustee can sell property that is not protected by an exemption. For a sole proprietor, that can include business equipment, inventory, money owed to you by customers, and cash in business accounts.
Florida does not have a separate exemption specifically for tools of the trade. Business property is generally protected only through the general exemptions, such as the $1,000 personal property exemption in the Florida Constitution (Fla. Const. Art. X, Sec. 4) and the additional $4,000 personal property exemption available to filers who do not claim the homestead exemption (Fla. Stat. 222.25(4)). A work vehicle may be protected up to $5,000 (Fla. Stat. 222.25(1)). Our guide to Florida bankruptcy exemptions covers each of these. If your business relies on equipment or inventory worth more than those amounts, Chapter 7 may put it at risk.
Chapter 13 bankruptcy is often a strong fit for people who want to keep working. You keep your property and repay a portion of your debts through a three to five year plan. Federal law treats a self-employed person who incurs trade credit in producing income as a debtor engaged in business (11 U.S.C. 1304(a)). Unless the court orders otherwise, you may keep operating the business during your case (11 U.S.C. 1304(b)).
That flexibility comes with responsibilities. A debtor engaged in business must file periodic reports on the business’s operations, including receipts and disbursements (11 U.S.C. 1304(c) and 704(a)(8)). In practice, this usually means monthly or periodic income and expense reports to the Chapter 13 trustee. Our article on how your Chapter 13 payment is calculated explains how the plan payment is built from your income and expenses.
Unpaid self-employment taxes and missed estimated payments are among the most common debts self-employed people carry. Some older income tax debts can be discharged if they meet specific timing rules, while others, including taxes that should have been withheld or collected on behalf of others, generally cannot. Chapter 13 can provide a structured way to pay priority tax debts over the life of the plan. Our guide on which tax debts can and cannot be discharged explains the rules in detail.
Filing bankruptcy does not have to mean closing your doors. For many self-employed Floridians, it is the step that clears unmanageable debt so the business has room to recover. The right chapter depends on your income, what your business owns, how it is organized, and what you need protection from. Some business owners with larger or more complex debts also explore Chapter 11, which includes a streamlined option for small businesses known as Subchapter V, and an attorney can help you understand whether that is worth considering.
Your business and your finances are connected, and your bankruptcy strategy should account for both. The attorneys at Parker & DuFresne have helped Northeast Florida freelancers, contractors, and small business owners since 1994. Call 904-606-9069 for a free consultation.
Yes. Self-employed people, including freelancers, gig workers, contractors, and sole proprietors, can file Chapter 7 or Chapter 13. The process is similar to any personal bankruptcy, with extra attention to business income, expenses, and property.
In Chapter 13, a debtor engaged in business may generally keep operating it unless the court orders otherwise (11 U.S.C. 1304(b)). In Chapter 7, you can usually keep working, but a trustee may sell nonexempt business property.
Your income is generally your business gross receipts minus ordinary and necessary business expenses, averaged over the six months before filing (11 U.S.C. 101(10A)). Good records are important because self-employed income often fluctuates.
Possibly not. The means test applies to filers whose debts are primarily consumer debts (11 U.S.C. 707(b)(1)). If your debts are primarily business debts, it may not apply, but the classification depends on your specific debts.
It depends on its value. Florida has no separate tools of the trade exemption, so equipment is protected only through general exemptions such as the $1,000 constitutional personal property exemption and, if you do not claim homestead, an additional $4,000 (Fla. Stat. 222.25(4)). Property worth more may be at risk.
No. An LLC or corporation is a separate legal entity, so its own debts are not discharged in your personal case. Debts you personally guaranteed for the company, however, are your debts and can be included.
Sometimes. Certain older income taxes can be discharged if they meet specific timing rules, while other tax debts cannot. Chapter 13 can also spread priority tax debts over the life of the plan.
Expect to gather recent tax returns, profit and loss statements, business and personal bank statements, a list of business assets, and a list of every debt, including personal guarantees. Your most recent tax return must be provided to the trustee before the 341 meeting (11 U.S.C. 521(e)(2)).
Yes. A debtor engaged in business must file periodic reports on the business’s operations, including receipts and disbursements (11 U.S.C. 1304(c) and 704(a)(8)). This usually means regular income and expense reports to the trustee.
For some business owners with larger or more complex debts, Chapter 11 may be worth considering, including a streamlined small business option called Subchapter V. Whether it fits depends on your debts and goals, so it is a question for an attorney.
Parker and DuFresne
