Gig Worker Performing Airport Passenger Pick Up

Bankruptcy in the Gig Economy

John T. Turco headshotByJohn Turco

The gig economy is something very unique, exciting, and freeing. It liberates regular people from the restrictions of corporate America and the hourly constraints of a “regular” job. In essence, the gig economy is a platform for a type of self-employment, be it big or small. It has the potential to unleash the American spirit of entrepreneurship for the everyday person. It also allows people the freedom to be more than just their job. It provides the gift of time so workers can focus on family, friends, and hobbies.

As with any form of employment, be it working for a company or being an independent Lyft or Uber driver, participants in the gig economy are not shielded from financial disaster.

In reality, a gig worker can be subjected to greater cash flow problems due to the semi self-employment nature of their work. Gig workers have a lot of advantages, but at the same time, there are also a lot of disadvantages they need to manage through.

Debt Relief for Gig Workers

Bankruptcy was created to help people get a fresh start when unanticipated financial disaster hits. The Covid-19 pandemic is a great example of unanticipated financial hardship.

Covid-19 and the switch to staying at home created a new environment for gig workers. While it helped drive new clients for grocery and takeout delivery services like Instacart, Shipt, UberEats, Grubhub, and DoorDash, it created a financial nightmare for Lyft and Uber drivers. Healthy Uber driver incomes disappeared overnight.

So what options do gig workers have? What can they do if they’ve fallen into financial hardship?

Bankruptcy is available to gig workers who are partially or fully self-employed. If you’ve found yourself in unraveling circumstances with substantial unpredictability, bankruptcy can provide debt relief. There are various types of bankruptcies available, although Chapter 7 and Chapter 13 are the most common. For those with substantially more debt, Chapter 11, Subpart V becomes an option to consider, which in major part, is similar to how Chapter 13 works with a few perks and disadvantages as well.

Chapter 7 Bankruptcy and the Gig Worker

Chapter 7 remains the most popular and most filed type of bankruptcy due to its quick and comprehensive nature. A gig worker may find themselves, in a post-pandemic spot where they’ve accumulated too much debt to realistically pay it off.

A Chapter 7 bankruptcy offers the ability to wipe out general unsecured debts, while also closing the case in about three and a half months. It’s a new lease on life for the gig worker! It allows the bankruptcy filer to go build something again, which is in one respect, fundamental to the nature of people working in a gig economy.

In a gig economy, change is the norm and one can raise from the ashes of economic ruin to financial success in a short period of time. In this regard, a Chapter 7 bankruptcy may be a great option to consider.

Chapter 13 Bankruptcy and the Gig Worker

For those people who have either created equity in their assets or continue to have an above-median source of income, Chapter 13 bankruptcy is a key tool to an effective financial solution. Gig workers absolutely have the right and ability to file Chapter 13 bankruptcy even though they don’t necessarily have a regular employer nor a constant or predictable source of income.

Just like the traditional self-employed person, there are many circumstances in which Chapter 7 is just not appropriate, is legally dangerous to file, or doesn’t accomplish a more precise financial solution.

Examples of when a Chapter 13 would be a more appropriate debt relief option include:

  • You believe you can get caught up on mortgage payments over a 3 to 5 year period.
  • You just make too much money to qualify for Chapter 7.
  • You have a significant tax debt.
  • You have substantial equity in your home or car.
  • A vehicle subject to repossession is used for both personal and business use.

Chapter 13 offers workers a very powerful solution for more complicated financial problems. As our economy moves further into expansion mode, Chapter 13 will be utilized more and more in the months and years ahead.

The gig economy simply didn’t exist a few years ago and the financial uncertainty is created is unchartered water for many. But know help is available.

Our bankruptcy lawyers have experience with workers who serve as Uber or Lyft drivers, work in food delivery roles, and many more gig-related roles. We understand your situation and your struggles. We’re here to help you navigate through financial uncertainty and get you to a place of stability.

Contact us for a free consultation! We’ll walk through your options to determine if bankruptcy is a solid strategy for you and your family.

Share
Tweet
Share
John T. Turco headshot

John graduated from Creighton University in 1986 with a B.S. in Computer Science. He received his J.D. in 1989 from Creighton University School of Law. John has 32 years of experience representing debtors in bankruptcy and debt related matters and is a former Chair of the Bankruptcy Section of the Nebraska State Bar Association. John has appeared on radio shows and has lectured to banking groups on issues regarding bankruptcy and collection practices. John is a member of the Nebraska State Bar Association and a founding member of the American Consumer Bankruptcy College. He is also licensed to practice law in the State of Iowa.