Bankruptcy for Gig Workers -- Uber, DoorDash, Freelancer Guide

Bankruptcy for Gig Workers and Freelancers

Filing bankruptcy as a gig worker presents unique challenges because your income is variable, you are self-employed, and your assets may include tools needed to earn a living.

• Means test: The 6-month income lookback uses your actual gross receipts. Variable gig income can make timing your filing strategically important -- file when income is lower.
• Self-employment expenses: Legitimate business expenses (vehicle, phone, supplies) reduce your means test income. Document everything carefully.
• 1099 vs W-2: As a gig worker, you receive 1099s, not W-2s. This means no employer withholding, and you may owe self-employment taxes that have priority status in bankruptcy.
• Tools of the trade: Most states have exemptions for tools, equipment, and vehicles used in your trade. These protect your ability to earn a living post-bankruptcy.

Chapter 7 vs Chapter 13 for Gig Workers

• Chapter 7: Works well if your average income over 6 months is below the state median. Since gig income fluctuates, you can time your filing for a low-income period.
• Chapter 13: Better if you have consistent gig income that exceeds the means test but need to restructure debts. The challenge is proposing a feasible plan with variable income -- courts may require you to demonstrate income stability.