If you're running a business, filing bankruptcy involves preparing a profit and loss statement. While this subject isn't terribly interesting or sexy, it's critically important to preparing accurate information for your bankruptcy lawyer.
What's a Profit & Loss Statement?
Relax! This isn't algebra or calculus. This is simply a statement showing income in and expenses out for a specific period of time. And for bankruptcy purposes, we focus on a month-by-month time frame. It shows whether you're making money or losing it. This is important for your bankruptcy, and it's important for you to understand for life after bankruptcy.
Despite fancy finance terms we hear tossed around, business is about one thing: taking in more money than you spend. If you do that, you make a profit. If you don't, you have a loss. And it doesn't matter if you're running a small mechanical company in East Nowhere, U.S.A. or you're running Ford, Wells Fargo, or Coca Cola. You take in more than you spend, that's good. You spend more than you take in, that's bad.
We've spend a lot of time here in Bankruptcy Law Network explaining the documents you must assemble prior to filing bankruptcy and the-sometimes silly-reasons why.
Consumer bankruptcy starts with CMI-"current monthly income." Like I've said, this isn't really current monthly income, but an average of the income for the six months prior to the month in which you file bankruptcy. So if you file in July, we need to know your income from January through June, broken down month by month.
If you have a job and get paid as an employee, we use pay stubs to figure this out. If you are self-employed, you guessed it, that's where the profit and loss statements come in.
by Russell A. DeMott, Charleston Bankruptcy Lawyer · Posted in * Business Bankrtupcy