If your income comes from freelance work, contracting, seasonal jobs or running your own business, you may assume bankruptcy is not an option for you. It is. The rules are just a little different when your earnings do not follow a predictable pattern. Understanding how the process handles irregular income can help you figure out where you stand.
How the means test works with irregular income
The means test is the income check used to determine whether you qualify for Chapter 7 bankruptcy. For most people, it compares household income to Connecticut’s median for your family size.
If you earn inconsistently, the court does not look at your best month or your worst. It takes the average of your income over the full six calendar months before filing and uses that figure to calculate your Current Monthly Income (CMI). This six-month window can work in your favor if you have been through a slow period recently.
How your income is calculated when it fluctuates
For freelancers, contractors and the self-employed, the calculation looks at gross business receipts minus ordinary and necessary business expenses. If you brought in $70,000 over six months but spent $25,000 on equipment, software, mileage and supplies, the court works from closer to $45,000. That distinction often makes qualification more accessible than people expect.
Income includes 1099 payments, client invoices, seasonal wages, commissions and regular household contributions from others in the home. Social Security and qualifying disability payments generally do not count.
Why timing and documentation matter
Because the means test looks at your last six months of income, when you file matters. Filing during or shortly after a slow season can bring your average down enough to qualify for Chapter 7. That is not a loophole. It is simply how the calculation works.
Documentation is just as important. You need to show what you earned and what you spent. Helpful records include bank statements, 1099 forms, profit and loss statements, invoices and client contracts. Missing or incomplete records can slow things down or create problems with your filing.
What if you do not pass the means test?
Not qualifying for Chapter 7 does not mean bankruptcy is off the table. Chapter 13 allows you to reorganize your debt into a three- to five-year repayment plan based on your projected disposable income. For people with irregular earnings, Chapter 13 is an option, provided you can demonstrate sufficiently stable and regular income to meet plan feasibility requirements.
If you are unsure which path fits your situation, speaking with a Connecticut bankruptcy attorney can help you map out your options without any pressure or guesswork. A free consultation is a good starting point.
