Bonus? Help...

[newlife13]

I filed my case yesterday. Yay!

And... I got an unexpected $3500 bonus today ($2500 after tax). Argh! What do I do? I really, really need to keep that money. I'd have declared it if I thought I was getting it. I thought it would be $500 max.

I gave my last two pay stubs and it wasn't on there because they gave me a live check today dated 12/29. I'm afraid this will look sketchy but they like to give them in person, so they take the whole month to have individual conversations and then hand out W-2s.

What do I do?!

[newlife13]

Edited to add: I had already seen my W-2 online and my Line 1 "Wages, tips and other comp." was only ~$500 more than my annual gross salary, so I assumed it was the amount of my bonus. But because the company made a 3600 contribution to my 401k, the wages amount was less? I don't know. I was sort of tricked by my W-2.

So, technically, the bonus doesn't really show on the actual W-2. Do I still need to hand it over? If the trustee asks about bonuses, I'll have to answer truthfully...

[leonel9]

What to do about your bonus depends on whether it is a discretionary bonus, when it was considered "earned" during the time your bankruptcy estate covers (e.g. a bonus for your 2016 performance), and finally what is common practice in your jurisdiction. In the 9th Circuit, if the bonus was paid for 2016 performance, and the trustee found out about this (e.g. from asking for your paystubs), the trustee would likely ask for the bonus.

You're not in the 9th Circuit, so you may be okay. I wouldn't go out of my way to announce this bonus, but I also wouldn't lie about it either. An attorney in your jurisdiction can share how it will be handled. You could try asking attorneys on Avvo or something like that, if you don't want to ask your attorney.

Also ... this is assuming that you aren't able to exempt the bonus. Do you have any free exemptions that will cover this?

[newlife13]

What to do about your bonus depends on whether it is a discretionary bonus, when it was considered "earned" during the time your bankruptcy estate covers (e.g. a bonus for your 2016 performance), and finally what is common practice in your jurisdiction. In the 9th Circuit, if the bonus was paid for 2016 performance, and the trustee found out about this (e.g. from asking for your paystubs), the trustee would likely ask for the bonus.

You're not in the 9th Circuit, so you may be okay. I wouldn't go out of my way to announce this bonus, but I also wouldn't lie about it either. An attorney in your jurisdiction can share how it will be handled. You could try asking attorneys on Avvo or something like that, if you don't want to ask your attorney.

I should probably ask my attorney. I don't want to start off on the wrong foot and piss of the trustee or do anything to jeopardize my confirmation.

It's not tied to performance. If there is money leftover after paying all the 2016 taxes, the president of the company disburses the money as she sees fit. It's not guaranteed and not part of my compensation package. She also throws some money into our 401Ks. Also not guaranteed.

Also ... this is assuming that you aren't able to exempt the bonus. Do you have any free exemptions that will cover this?

I don't know. I think he used them all. And, Isn't it too late anyway? He filed *yesterday*.

What terrible timing. He probably could have tried to exempt it.

[leonel9]

When I wrote my initial reply I thought you were in a Chapter 7 case. My apologies for not noticing that it's actually a Chapter 13 case.

Given this, I'd definitely consult with your attorney, as he may have factored in some amount of bonuses in calculating your income. Regardless, some trustees take bonuses and tax refunds in CH13 cases, whereas some don't even ask. Your attorney should be able to give you a better answer.

[newlife13]

When I wrote my initial reply I thought you were in a Chapter 7 case. My apologies for not noticing that it's actually a Chapter 13 case.

Given this, I'd definitely consult with your attorney, as he may have factored in some amount of bonuses in calculating your income. Regardless, some trustees take bonuses and tax refunds in CH13 cases, whereas some don't even ask. Your attorney should be able to give you a better answer.

Thanks. He definitely didn't factor in a bonus. Ugh.

[newlife13]

I spoke with my attorney today. He said if it's not recurring as part of my comp plan not to worry about it.

I'm so glad I asked because I was freaking out and didn't want to do anything that was not allowed. I want my plan confirmed and to move on with my monthly payments and my life!

[leonel9]

That's great news -- good luck with your confirmation!

[Chrysalis]

leonel9, I am confused about what you are saying re: exemptions for cash like this.

In Indiana, we've been told we can only have $800 between us in ANY accounts on the day we file. We've also been told that we won't be able to keep the kids' life insurance because it has cash value. That really sucks. I am still trying to figure out if we can take a loan on the cash value before we file, instead of having to cash in their policies altogether.

Does this just vary a lot, from state to state?

[leonel9]

Bankruptcy exemptions absolutely vary between states. In Indiana, it appears that Ind. Code Ann. § 34-55-10-2 grants a $350 exemption for intangible personal property (versus tangible property like a TV). This exemption can double for married couples. Indiana's wildcard exemption appears to only apply to tangible personal property.

So in short, married couples in Indiana may be able to exempt up to $700 in cash. That's not much.

Regarding the life insurance policies, I did the exact same thing -- took out a loan on the cash value. I used this to pay my attorney. When the attorney prepared the filing, she listed the loan as a secured loan, and listed the payments along with other payments to secured creditors. I don't know if this is proper to say the loan is secured by a life insurance policy. I'm not an attorney, so I won't question it any more since no one else seems to be questioning it.

As long as the loan proceeds are used for necessary expenses, I don't see why this would be a problem. Check with your attorney, to be sure.

[Chrysalis]

leonel, I've seen various numbers on various websites. According to our attorney and legal consumer, the number is now $400 for each of us, so a total of $800 -- which, as you said, is still NOT MUCH. We have all of our kids' savings in our names, too. It has to be spent.

I talked to the attorney about the life insurance a little bit. We have not actually paid him anything or signed a contract with him yet, so I try not to bother him with too many emails. ;) But here was his response:

"One, I'd have to review the policy language and also assess the amounts at issue. Two, and perhaps most importantly, is the bigger picture. I cannot stress enough that timing is critical and whenever you spend down money prior to bankruptcy filing, they're going to look at that very hard and again, bigger picture, it looks bad when you have various assets that are liquidated and none of the money is used to pay creditors and debts. Not to say that you couldn't do that, but I would advise against it. At some point, too many red flags only invite more scrutiny and ultimately, a trustee or creditor(s) who wants to challenge your bankruptcy discharge."

So... I have not been sure WHAT to do about their life insurance. I have the forms here to cash it out, but it just feels wrong. ...But it ALL feels wrong, you know? Last thing I want is red flags. But I'm certainly not going to leave it as-is, and let them take that money and give it to our creditors. What would they even do? Would they force us to cash in our kids' life insurance? Would they force us to take a loan? I don't even understand how that would work.

OP -- sorry for derailing your thread! leonel9, we can move the conversation over to my thread if you'd like. ;)