Bonuses

[tiredintx]

First let me say hello, I've been roaming for 3 days and have found ALOT of information. I've been searching the web for 3 weeks and have learned more in the last 3 days on this site!

I had my first consultation last Friday and was told that I would need file chap 13 ... which really scares the crap outta me

There are quite a few things I still don't understand.

I am married but will file alone. My husbands debt is small and his credit is still somewhat intact.

Combined monthly base(40 hours each) income is 6200 plus 466 a month child support I receive. 3 person household. My husband has 726 month court ordered child support/insurance he pays.

$150k unsecured debt

Assets:
Homestead no lien - exempt
2 vehicles no lein - exempt
bass boat non-exempt, value is about 6k

My first question is about bonuses, usually 2 times per year my employer hands me a bonus check. Historically it has been around July and November. Last year the July check was 10k and the Nov. check was 15k.

My thoughts were to wait until June to file with the 6 month look back no bonus check to include into income and also my husband had alot of overtime last year that will stop this week. Beginning in Feb he may get 5 hours per month at the most.

The attorney I met with said that I should file now and my chap 13 payment would only be $102 and that's keeping the bass boat and including the 15k bonus. I don't understand how he came up with that number. When I do the means test using the national standards deductions and excluding his 726 child support I'm getting a DMI of 1012 and thats not including the 15k bonus. With the bonus DMI is 3512. DMI of 3512 puts me at 100% payback.

Where in the world could he get a $102 payment?

I know my bonuses won't be as much this year because our contracts are 1/3 compared to the last 2 years.

I would really consider debt settlement in lieu of a 100% payback chap 13.

Edited to add that we are in Texas!

[justbroke]

I don't know how your attorney came up with the number either, but I can't come up with any number, as I don't know your financial picture. Since your bass boat is $6K and non-exempt, I can easy see your "minimum" payment to unsecured creditors being $100/month over 60 months (to pay at least $6K to them). Maybe he said the "minimum" payment is about $100/month???

Yes, your bonuses do need to be factored in as an "average" bonus. While the Means Test can be manipulated, you really should be looking at the affect of your bonuses. The Trustee will be able to see this by just taking last year's IRS Form 1040 and dividing your AGI by 12 to see what your "real" monthly income is. If your lawyer thinks you can hide the bonuses... let him show you how.

As for debt settlement over a Chapter 13... even a 100% Chapter 13 has the benefit of a Court imposed stay, and no interest accumulation. If we all had the $$$ sitting around for lump sum settlements, we'd probably not worry. Alas, the dreaded 1099-C is also there looming its ugly tax-rearing head... should you choose debt settlement.

[tiredintx]

I don't know how your attorney came up with the number either, but I can't come up with any number, as I don't know your financial picture. Since your bass boat is $6K and non-exempt, I can easy see your "minimum" payment to unsecured creditors being $100/month over 60 months (to pay at least $6K to them). Maybe he said the "minimum" payment is about $100/month???

Yes, your bonuses do need to be factored in as an "average" bonus. While the Means Test can be manipulated, you really should be looking at the affect of your bonuses. The Trustee will be able to see this by just taking last year's IRS Form 1040 and dividing your AGI by 12 to see what your "real" monthly income is. If your lawyer thinks you can hide the bonuses... let him show you how.

As for debt settlement over a Chapter 13... even a 100% Chapter 13 has the benefit of a Court imposed stay, and no interest accumulation. If we all had the $$$ sitting around for lump sum settlements, we'd probably not worry. Alas, the dreaded 1099-C is also there looming its ugly tax-rearing head... should you choose debt settlement.

Here's my concern with the bonuses being included... they are not guaranteed and it's sporadic... I'm just worried that I'm going to end up with a $3500 payment based on the bonuses that I can't make on a monthly basis. I've read enough to know that those will be 'taken' by the trustee and I don't have a problem with that but don't make my payments so unbelievably high that I can't make them... does that make sense?

With a potential 3500 payment to chap 13 and only bringing home 4500 after taxes, insurance and child support payments I'm setting myself up for failure.

Any and all thoughts are welcomed and appreciated!

[justbroke]

Here's my concern with the bonuses being included... they are not guaranteed and it's sporadic... I'm just worried that I'm going to end up with a $3500 payment based on the bonuses that I can't make on a monthly basis.

Well, I have the same issue, but my DMI is based on my "annual" bonus. If they are so variable, your attorney may be able to use an average which is more consistent with that variability. You "may" be able to just ask that you surrender the entire bonus each time you receive it... like they treat tax refunds in most Districts. This is something you'd have to work out.

Remember... in exchange for the full power of the Court and for the use of the powerful automatic stay, you surrender to the Chapter 13 Trustee all disposable income during the Plan.

I've read enough to know that those will be 'taken' by the trustee and I don't have a problem with that but don't make my payments so unbelievably high that I can't make them... does that make sense?

Yep, see what I wrote above.

[tiredintx]

Well, I have the same issue, but my DMI is based on my "annual" bonus. If they are so variable, your attorney may be able to use an average which is more consistent with that variability. You "may" be able to just ask that you surrender the entire bonus each time you receive it... like they treat tax refunds in most Districts. This is something you'd have to work out.

Remember... in exchange for the full power of the Court and for the use of the powerful automatic stay, you surrender to the Chapter 13 Trustee all disposable income during the Plan.

Yep, see what I wrote above.

Oh it makes me feel so much better that something like this could maybe be negotiated. Deep breath for me

I was just so concerned after looking at the means test that I'd end up being strapped worse than I have for the last year...

I don't want anybody to think that I'm trying to hide anything... just trying to get to where I can live month to month

Thanks again

[ame8199]

I sometimes get bonus though my job as well. It just depends if we have money left over at the end of the fiscal year. We didnt include it in my income but the trustee did ask about it during my 341 meeting. I just told him that its not garunteed and he seemed ok with it. My plan was confirmed without a problem Im sure around May, if I get a bonus, Im gonna have to surrender it.

[mybk]

'All' disposable income, remember that you in many cases are allowed an emergency fund of money. Typically a chapter 13 is not about draining you dry so that you can not overcome normal unexpected conditions (including unemployment or under employment). Make sure you have an emergency fund, if not, use the bonus to build it.

The normal acceptance I believe is 3 times your monthly expenses (rent, utilities, etc..).

In our case, we plan to put our tax return to that same use. Though we in our filing are allowed to keep them, this years return will be bigger than we stated due to child credit still being available.

[andy158]

Our gain sharing "bonuses" are included in our pay stubs in a separate colomn, but also added to our ytd totals when they are issued. Usually every quarter. When I filed the bonuses were already in my ytd total on my check stubs and were calculated in our DMI formula. Our total bonuses last year were a whopping $3,800 total. Not enough to make a substantial difference. Haven't had any bonus since we filed in July last year due to bad economy. Don't count on money you don't earn in your budget. As stated previously put any unplanned money into an emergency fund. You will eventually need it. We always used cc's as our back up emergency money in our budget before bk. Don't have that option anymore and don't want it.

[brokenymom]

i would seek another attorneys advice. i'm 90k in debt, we make as much as you do and i'm paying $1330 month

[mybk]

Your $100 per month figure sounds a bit low, I would not expect anything below $300 per month. Though I would not say as high as $1300+ either unless you are just hauling in the cash and end up 100% payback.

A good attorney and a caring trustee will settle on an amount which has you paying back what you can without punishing you. If good, both are trying to give you a budget which you will be able to complete. Don't sign into anything that you a not convinced you can complete, otherwise you are just wasting your time and money.

You should be able to look at your proposed plan and see some room in there for you to save (without encouraging saving, you will never over come the unexpected and will likely fail the plan). There should be room to allow for income increases that might occur (small ones to keep up with cost of living, once again to ensure you complete the plan).

Treat this as though you are signing a contract (because you are) and try to get a reference from another on a good attorney. Don't just accept the first one you call up.

[debtinohio]

It's hard to compare payments since some include secured and some pay some secured outside the plan. Really need to look at each individual debt/disposible income/expenses.

Mine is $1400 but includes 800 in secured payments that were included in the plan. My remaining is 12% to unsecured/attorny/trustee fees.

brokenymom's might be 80% payback or 0% and all secured, including her home. It's just not apples to apples.

[kornellred]

All of the calculations used in determining Chapter 13 plan payments are based upon the 6 month look back period. If the bonus income skews the monthly income figure higher, I'm afraid that it's just the way it is. That is the nature of the compromise lawmakers arrived at - you have to start somewhere, and there is no time to engage in intense income studies and use that data to predict future income.

I made out like a bandit in my Chapter 13. My yearly incentive (bonus) paycheck was issued a few days after my filing date. Otherwise, my average monthly income would have been calculated about $1000 higher than it was.

If your bonus payment is significant, you should wait to file until that payment is more than 6 months in the past. It is purely a matter of numbers.

[tiredintx]

Just wanted to update, I had another meeting with the attorneys after faxing 6 months of paystubs. We are going to wait until the bonus is not in the 6 month lookback. He figures my payments will be in $1000 range. So I'm happy, I can handle $1000.

[forgotten]

I made out like a bandit in my Chapter 13. My yearly incentive (bonus) paycheck was issued a few days after my filing date. Otherwise, my average monthly income would have been calculated about $1000 higher than it was.

I assume your 341 didn't have the question that mine did? "Do you, or are you eligible to receive bonuses?"

[debtinohio]

I assume your 341 didn't have the question that mine did? "Do you, or are you eligible to receive bonuses?"

If so, LUCKY!