Performing Arts Career Hiatus in Chapter 13

[Barbisi]

I have never seen this topic addressed on these forums because I presume most filers are office and /or tech professionals (which I am not ) who are not concerned with nor need money for head shots, demo reels, acting or voice -over classes, singing classes,screen writing classes ,etc. in order to continue in their chosen field.
My question is: for those of you who are pursuing or attempting to pursue an on camera /voice -over career, since you enrolled in chapter 13 , are you still active in your field, have you abandoned all career aspirations, have you found ways to make money that the trustee did not confiscate in order to finance required business expenses, or are you putting your dreams on hold for 5 years to make it through the chapter 13? And if you managed to survive your chapter 13 were you able to resume your career and did you have any success or was it too late?
Many do not realize 5 years is a very long time to put anything in hibernation be it home and/or car repairs, health care and or most of all, a career!

[justbroke]

I can put it this way for you (as a business person who has been in Chapter 13).

You are absolutely allowed to incur debt and have expenses "in the ordinary course of business." Absolutely allowed an codified in the bankruptcy code. In fact, most Chapter 13 Plans of Reorganization, while prohibiting the debtor from obtaining new credit without permission, will contain the same exact words.

A person in a Chapter 13 does not need to stop a business. A person in a Chapter 13 can continue operating the business and using credit "in" that business.

Your question, though, somehow edges on things other than expenses related to the operation of the business. If it's income and you're using it as income, then it is reportable (at least to your attorney). Remember... pay to play. If they are direct expenses, then you would just do your normal IRS reporting (& State reporting) as necessary. I would keep good accounting records, just as any good business would maintain.

[Barbisi]

Just broke, thank you yet again for replying!
We have 3 years of losses on our tax return (even though I earned money in 2015), and were told things like head shots are not viable business expenses by the lawyer.The trustee considers me a housewife since I was unable to audition or book work in 2016 due to many horrific life changes and consequently did not earn any money. Although I did not complete my university degree, (but still paid back my school loan) I speak 3 languages (and have working knowledge of a 4th!) have a trained operatic voice, and have worked on camera as an actress and as a voice-over artist and have studied a bit of screenwriting in order to complete story lines I have long harbored (I have clear and definite screen plays already written in my mind that need to be fleshed out and written down).
It sounds like any money I might earn would be confiscated at 100% by the trustee since I would be going from a 0% income.The lawyer said in essence that there really is no incentive for some one like me to work at all during the life of the chapter 13.
I really hoped some one else in a performing arts field was also in a chapter 13 and could share how they managed. It seems yet again I stand alone, meaning everyone on these forums are self employed business non-arts professionals or high-tech office professionals (like my husband who works as an software /electrical engineer but wants a second career in animation ,audio engineering and voice-over.(He has never taken to on- camera work, nor is he particularly interested in writing.)

[justbroke]

I would think that the Trustee is questioning more of whether what you do is a hobby or a career. That fine line also comes up when it comes to taxes. If it is not an activity that is both regular and produces income for you, the it is likely treated as a mere hobby. Just obtaining head shots would not normally be a business expense, no more than if I bought two servers and setup a Web site in my home would not be a business expense. I know that you know that your work is not a hobby, but that is what happens.

If you treat it like a business, maintain books, registered with the State, dedicated phone number, it gives it more a business look and feel. If it's something you're trying to get back into (or do), then it could give the appearance of a hobby and not a "business".

head shots are not viable business expenses by the lawyer

I wanted to address this individually. It's not a business expense because how it looks on paper doesn't have the accoutrements of a business. Is it listed separately on a Schedule C? The Trustee wouldn't care if it were a business (taxed and registered) and that any "income" you produce is used in the calculation of DMI (which it should be). If it's not a business then it doesn't get to claim any business expense. For example, I do work on the side but it is irregular, not a lot of money, and doesn't have it's own Schedule C (or other filing). It's a hobby so I can't claim mileage, losses, expenses or anything else related to that activity. The Trustee will treat it the same and if it is making money, "may" want it calculated in the DMI.

I don't think it's unique. The code deals with this day-in and day-out with other debtors. In bankruptcy, especially Chapter 13, you can't necessarily create new personal debt to start a business because has to be in the ordinary course. Adding an expense for, let's just say, head shots and the business doesn't produce money means that it's coming from DMI and that is a no-no. A business needs to be funded with its own revenues, unfortunately. That makes it difficult to either start or even maintain a fledgling business while in a Chapter 13. With a Chapter 7... it's easy because it's a snapshot... not a 3-5 year pending bankruptcy.