Bonus Income and Chapter 7: It's All About When You Earned It
San Jose Bankruptcy Attorney reveals information on bonus earnings
A good question came up the other day from a consult that our San Jose bankruptcy firm had with a potential bankruptcy client. He works in an industry that pays out large bonuses every quarter and most of his income is gained from that source. He wanted to know what effect these bonus payments would have on his ability to do a Chapter 7 bankruptcy and what it would mean in terms of a Chapter 13 bankruptcy.
There are two issues involved with this. First what effect does it have on the means tests. For those we look back 6 months and include income, bonus or not, and see what the gross amount is. If you are paid a bonus every 3 months then you may have to include two bonus payments into the calculation. 2nd issue is will future bonuses be taken by the bankruptcy Court. Short answer is, maybe.
For the Chapter 7 trustee to lay claim to the bonus income that income needs to be 'earned' at the time of filing and not contingent upon further work or time with the company. Basically it needs to be fixed. Then we'd look at exactly when the case was filed and determine how much of the 'earned bonus' was due at the time of filing. For example if you worked 1 of 3 months and you were owed that bonus at the time of filing then the trustee may make a claim for 33% of it.
This is a complex issue and if this situation applies to you then I would seek out the advice of a knowledgeable bankruptcy lawyer here in the Portland Oregon area. Timing and correct valuation and treatment of bonus income can make a huge difference in your case.
If you have questions regarding Bankruptcy in San Jose please contact us at 408.279.2288 for a free consultation or visit www.bkanswers.com and we can connect you with one of our experienced San Jose Bankruptcy Attorneys. After you have spoken with one of our downtown San Jose bankruptcy attorneys, we can schedule you for a free face to face appointment in an office location nearest you. Our team of San Jose Bankruptcy Lawyers can assist you with all aspects of your bankruptcy or bankruptcy litigation case. If you have questions about filing a Chapter 7 bankruptcy, a Chapter 11 bankruptcy, a Chapter 13 bankruptcy, or would like to learn more about bankruptcy litigation, legal debt settlement, mortgage modification, lien stripping, cram down, stopping a foreclosure, wage garnishment, asset protection, discharging a debt, etc. we can help! We have bankruptcy attorneys located throughout California and Oregon who can assist you with all of your debt resolution questions. Please feel free to complete our free online bankruptcy evaluation and we can quickly determine if you are a qualified candidate for bankruptcy. We look forward to hearing from you, San Jose and the South Bay!
