Self-employment in Wyoming offers both independence and financial risk. When small business owners face setbacks such as declining income, client loss, or insurmountable business debt, they often find themselves scrambling to manage a complex mix of obligations, including credit card debt, tax liabilities, vendor bills, and personal guarantees. This struggle naturally leads to a critical question: “Can a self-employed person file for bankruptcy?” Being self-employed does not exclude you from seeking bankruptcy protection. Please continue reading, and contact our experienced Gillette Bankruptcy Lawyers who can help assist you during these difficult times. 

Can Self-Employed People File Bankruptcy in Wyoming?

First and foremost, it is crucial to understand what qualifies as “self-employed” in Wyoming. Self-employed encompasses numerous arrangements, including:

  • Freelancers and Independent Contractors: This group includes rideshare drivers, consultants, creatives, and gig workers.
  • Sole Proprietors: Individuals operating small businesses, either under their personal name or a “Doing Business AS” (DBA) name.
  • Single-Member LLCs: Businesses structured as Limited Liability Companies, where one individual is the sole owner and operator.
  • Independent Professionals: Those running their own practices, firms, or shops (e.g., dentists, lawyers, small shop owners).

For bankruptcy proceedings, the defining characteristics are deriving income from self-directed commercial activity, whether this is the sole source of income or supplements a traditional W-2 salary. While being self-employed alters the methods used to calculate your income and the handling of your business assets, it does not exempt you from filing for bankruptcy protection.

Distinguishing between personal and business entities is key:

  • Sole Proprietor: No legal separation; personal bankruptcy usually covers both personal and business debts.
  • Corporations/LLC: A separate legal entity; may require a separate business bankruptcy if the company is pursued by creditors.

Often, self-employed individuals file personal bankruptcy to eliminate personal liability for business-related debts, even if the business entity doesn’t file.

What Types of Bankruptcy Do Self-Employed People Commonly Use?

Chapter 7, also known as “liquidation” bankruptcy, wipes out qualifying unsecured debts for individuals, potentially covering both personal and business debts. A court-appointed trustee may sell non-exempt assets to pay creditors, though many fielrs keep their property due to exemptions. For corporations/LLCs, Chapter 7 is typically a way to shut down and liquidate; the entity does not get a discharge.

Chapter 13is a repayment plan over three to five years for individuals with regular income, including those who are self-employed. Payments are made to a trustee and distributed to creditors according to a court-approved plan, after which remaining qualifying unsecured debts are discharged. This route is advisable if you want to keep assets at risk in Chapter 7, need time to catch up on a home mortgage or car loan, or have steady self-employment income to support payments. Sole proprietors often continue operating their business but must provide documentation and stay current on payments.

For guidance and skilled representation, please don’t hesitate to contact an attorney at 307 Bankruptcy.