The Gig Economy Bankruptcy Wave: A Growing Crisis That Independent Contractors Can No Longer Ignore
As we progress through 2025, bankruptcy filings have been steadily on the rise, with 517,308 bankruptcy cases filed in 2024—a 14.2% increase from the 452,990 filed in 2023. Among those most vulnerable to this growing financial crisis are the millions of Americans working in the gig economy. With projections showing 86.5 million people will be freelancing in the United States by 2027, this sector continues to reshape the way millions of Americans earn a living, offering both unprecedented flexibility and new challenges.
The Perfect Storm: Why Gig Workers Face Unique Financial Vulnerabilities
Unlike traditional employment, gig work often lacks the stability of a regular paycheck, benefits, and job security. This variability can lead to financial instability, making it harder for gig workers to manage expenses, save for emergencies, or invest in their futures. The financial challenges facing independent contractors have been amplified by several converging factors:
- Income Volatility: Gig workers can be subjected to greater cash flow problems due to the semi self-employment nature of their work
- Lack of Benefits: This lack of a safety net can create significant financial vulnerability for gig workers, as they are responsible for covering their own healthcare costs
- Economic Uncertainty: Global events like pandemics and inflation have led to increased financial uncertainty. Workers demand quick access to their earnings—for many, immediate income is the difference between financial stability and crisis
The Rising Tide of Gig Economy Bankruptcies
According to Amy Quackenboss, executive director of the American Bankruptcy Institute, “The growing number of households and businesses filing for bankruptcy reflects the mounting economic challenges they now face. Debt loads are expanding as the prices of goods and services have gone up with inflation and the cost of borrowing continues to rise”.
The bankruptcy wave isn’t just affecting traditional employees. The treatment of gig economy workers in bankruptcy proceedings is an area to watch, as questions about the classification and rights of these workers in bankruptcy contexts are likely to become more prominent. This could include issues related to worker classification, the priority of gig worker claims, and the treatment of gig economy platforms in bankruptcy proceedings.
Understanding Your Options: Chapter 7 vs. Chapter 13 for Gig Workers
Fortunately, gig workers, like traditional employees, can file for bankruptcy under Chapter 7 or Chapter 13. Each option offers different advantages depending on your specific circumstances:
Chapter 7 Bankruptcy
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.
Chapter 13 Bankruptcy
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.
Special Considerations for Independent Contractors
Filing for bankruptcy as a gig worker presents unique challenges that traditional employees don’t face. This can make it trickier to figure out your income, which you’ll need to do to file for bankruptcy. If you’re self-employed, you likely aren’t paid in the same way as a salaried worker, so it may be difficult to figure out your monthly income. This article provides some tips for calculating your income for your bankruptcy forms when you’re self-employed.
Irregular income can complicate this calculation, but bankruptcy courts will consider average income over a specific period to determine eligibility. It’s crucial to maintain detailed records of your earnings, including invoices, bank statements, and receipts.
The Importance of Professional Legal Guidance
Given the complexities surrounding gig worker classifications and bankruptcy law, seeking experienced legal counsel is essential. For residents of Long Island and surrounding areas, a qualified Bankruptcy Lawyer Suffolk County can provide the specialized guidance needed to navigate these challenging waters.
The Frank Law Firm P.C., located in Suffolk County, New York, understands the unique challenges facing gig workers and independent contractors. Their skilled bankruptcy lawyers help clients navigate the complex legal process to achieve financial freedom. They understand the stress and emotional turmoil of mounting debt, and their compassionate team has helped numerous individuals and businesses throughout Suffolk County and the surrounding areas.
Taking Action: Steps to Financial Recovery
If you’re a gig worker struggling with debt, consider these immediate steps:
- Document Everything: Maintaining accurate records of income and expenses is crucial. Detailed documentation of earnings, including invoices, bank statements, and receipts, is essential for bankruptcy filings. These records provide a clear picture of financial status and are necessary for meeting legal requirements
- Assess Your Options: Determine whether Chapter 7 or Chapter 13 bankruptcy would be more beneficial for your situation
- Seek Professional Help: Consult with an experienced bankruptcy attorney who understands gig economy challenges
- Act Quickly: The bankruptcy process was created to provide a fresh start for people experiencing an unanticipated financial crisis
Looking Forward: Hope for Recovery
Despite the current challenges, there’s reason for optimism. The overall outlook for the gig economy remains overwhelmingly positive, with 86% of freelancers thinking that the best days for freelancers are yet to come. This optimism reflects a belief that the gig economy will continue to evolve and provide even greater opportunities for independent workers in the years ahead.
Bankruptcy offers a new lease on life for the gig worker! It allows the bankruptcy filer to go build something again, which is fundamental to the nature of people working in a gig economy. In a gig economy, change is the norm and one can rise from the ashes of economic ruin to financial success in a short period of time.
The bankruptcy wave affecting gig workers in 2025 is real and growing, but it’s not insurmountable. With proper legal guidance, careful planning, and the right bankruptcy strategy, independent contractors can navigate this financial crisis and emerge with a fresh start. Don’t wait until it’s too late—if you’re struggling with debt as a gig worker, seek professional help today to explore your options and protect your financial future.