How can I keep my (hopefully) annual bonus from work?

[FishersMike]

Okay I have been doing some reading on here and found some information regarding company bonuses. I know that I do not have to include bonus on my schedule I since I am not guaranteed an annual bonus since based on individual and company performance. However, I am hopeful I would get around $3000 a year bonus. So here are my questions:

1) Do most trustees take your annual bonus (I live in Indiana) - I know a lot of people will say it depends on trustee and district. But I would like to see what the general "norm" is. How I was able to get my plan and DMI on 22C, they unsecured creditors are looking about getting $10.00 a month......

2) If it is likely the trustee would take my annual bonus, especially since unsecured will be getting next to nothing, what about if I include about $3,000 a year on my schedule I and actually specifically put "anticipated annual bonus". I know a lot will say not to include income that is not guaranteed to risk me having higher payments in case I do not get one, etc. However in my circumstances I have left out deductions on my Schedule J that are reasonable and would not cause the trustee to question -- I had to leave them out to have enough money to show that I had enough to support my estimated payment on 22C. So essentially I could put the bonus on and still pay unsecured creditors next to nothing.

But... if I do include the anticipated bonus on my schedule I does the trustee HAVE to let me keep my bonus (at least of to the $3000) or could they still decide to take it?? It would be BS if they could take it if it was anticipated in my original schedule in my opinion.

3) If the above is likely not good news and in my situation because not paying unsecured much, and likely would have to pay my annual bonus - what about the following:

My company allows us to elect for our bonus (partial or entire) to be put into our 401k plan and NOT send a check. Since they are not paying me, they are paying my protected retirement account, could I get away with this? Because I much rather the payment be paid to me then to unsecured creditors.

Also I am not worried about tax refunds as I will try to make sure they are not much, and since I owe the IRS they will hold them anyway -- which is another discussion in it's entirety since I will be paying them in my plan. So I am assuming that since I am paying them off through plan anything they hold will eventually go to unsecured creditors.

Please provide as much thorough explanation to the above questions as I want to make sure everything is done correctly to keep the most and paying the least to unsecured. Appreciate everyone!

[Pandora]

Okay I have been doing some reading on here and found some information regarding company bonuses. I know that I do not have to include bonus on my schedule I since I am not guaranteed an annual bonus since based on individual and company performance. However, I am hopeful I would get around $3000 a year bonus. So here are my questions:

1) Do most trustees take your annual bonus (I live in Indiana) - I know a lot of people will say it depends on trustee and district. But I would like to see what the general "norm" is. How I was able to get my plan and DMI on 22C, they unsecured creditors are looking about getting $10.00 a month......

2) If it is likely the trustee would take my annual bonus, especially since unsecured will be getting next to nothing, what about if I include about $3,000 a year on my schedule I and actually specifically put "anticipated annual bonus". I know a lot will say not to include income that is not guaranteed to risk me having higher payments in case I do not get one, etc. However in my circumstances I have left out deductions on my Schedule J that are reasonable and would not cause the trustee to question -- I had to leave them out to have enough money to show that I had enough to support my estimated payment on 22C. So essentially I could put the bonus on and still pay unsecured creditors next to nothing.

But... if I do include the anticipated bonus on my schedule I does the trustee HAVE to let me keep my bonus (at least of to the $3000) or could they still decide to take it?? It would be BS if they could take it if it was anticipated in my original schedule in my opinion.

3) If the above is likely not good news and in my situation because not paying unsecured much, and likely would have to pay my annual bonus - what about the following:

My company allows us to elect for our bonus (partial or entire) to be put into our 401k plan and NOT send a check. Since they are not paying me, they are paying my protected retirement account, could I get away with this? Because I much rather the payment be paid to me then to unsecured creditors.

Also I am not worried about tax refunds as I will try to make sure they are not much, and since I owe the IRS they will hold them anyway -- which is another discussion in it's entirety since I will be paying them in my plan. So I am assuming that since I am paying them off through plan anything they hold will eventually go to unsecured creditors.

Please provide as much thorough explanation to the above questions as I want to make sure everything is done correctly to keep the most and paying the least to unsecured. Appreciate everyone!

I would not include your bonus as income - you do not know (as you stated) how much its going to be and in order to do so, you'd have to save that money and not touch it. If you include it your plan payment may go up $50 a month if in a 60 month plan, and $83 a month if in a 36 month. What does your 6 month income show?

Why would you leave out necessary expenses in order to pay for your plan? That means that you're not budgeting correctly and will - more than likely - not complete your Ch. 13 plan. If you're -DMI after accounting for every expense you have in a year, then maybe a 13 isnt right for you - perhaps a 7 is.

Trustee's do not have to let you keep anything. Their job is to get as much money as possible to repay your creditors, thats the bottom line. I'd say based on what I've read on here with others, most Trustee's will allow you to keep your annual pay raise and/or bonuses you may receive. Some have taken half of the allotted raise/bonus while letting you keep the other half. It really depends on your Trustee.

You are allowed to contribute to your 401K if you've been doing so prior to filing. That is generally not an issue.

[Flamingo]

You are hoping to keep funds that will be additional income to you during your Plan. If you receive a bonus anytime over the course of your Plan years, it's income over and above what you indicated at filing and would need to be reported to your attorney and trustee. You need to discuss your situation with your attorney as to how this should be handled if this bonus is actually expected every year. Just because it would go into your 401(k) plan does not disguise the fact that it is additional income. A chapter 13 plan cannot be based on an anticipated bonus (it may not be given) or decrease/increase in income in the future - it's based on what your financial situation is now. Discuss with your attorney.

[justbroke]

I will simplify this. If you are not in a 100% plan, then you are entitled to discharge all unsecured debt if you pledge all your disposable income over the course of the plan to reduce the unsecured debt. That pledge means all disposable income. Your bonus is disposable income if it is above and beyond the expense allowances that are in your plan.

The real question is, given your unsecured debt, is it worth $3,000/year for 5 years to discharge, let's say, $100,000 of debt? When I was in my Chapter 13, the bonus was irrelevant to me as I stood to discharge over $400K in unsecured debt. I thought of it as nothing more than "payments" on my "credit cards".

The real key to a successful Chapter 13 is having a plan that is livable.

(I agree with Pandora in that you wouldn't include the "potential" bonus as income. You would just surrender it annually if your Plan Confirmation Order requires it.)

[momofthree]

I have to question Pandora's math and agree with JB here.

If you write down that you have an additional $3000/year in income, that equates to an additional payment of $250 per month just so you can receive the lump sum each year. That is ridiculous if you're already having to withhold expenses to make your schedule J show a positive dmi. Commit to giving them your bonus each year instead, it equals the same amount either way. You might even get lucky, and they could let you keep it for free depending on your district. (we aren't required to hand over bonuses, tax refunds, overtime, etc. so it IS possible, but I don't know how common that is...)

[FishersMike]

Thanks everyone. I will not include the bonus on my schedule I since it is not secure. I could technically file a Chapter 7 if I wanted to, even though I am over the median by quite a bit. A Chapter 7 will do nothing for me. The reason I am filing is that I have about $18000 in unpaid taxes. A Chapter 7 in my case could not help anything on that. A Chapter 13 will reduce it to about $14000.00 because it will make the penalties and interest on penalties (thanks JB for advising this earlier) moved to unsecured debt. I also want to cramdown my 2007 Jeep Commander as it only has 40000 miles on it, and has a Lifetime Warranty -- which I paid extra to cover all parts not just the PowerTrain. So I can keep this car forever. My payments on the Jeep right now are $599.00 a month which I have about 3 years left in payments. How I worked my figures, my Trustee payment would be about $687 a month which includes the taxes, Jeep, and attorneys fees. This is not much more.

The reason I can play with my figures is I have a domestic partner who is technically my "roommate". He deposits his money into my account as he does not have a bank account. So I have to figure what I am going to say his "rent" is -- before it was not a dead set figure. But I think I am going to show he contributes about $600.00 a month (which is fair since my rent is $975.00 a month and in my area I can claim $1150 I believe). But I could easily make his new official "rent" $400.00 a month.......

This would not be lying in my opinion because I will just determine the official amount and charge him that.... because I am only saying one person household even though his money before was also used for entertainment and food. I only put $450 a month for food, but spend more than that with him. I could claim more food and say that he pays more for rent but it includes food, therefore food budget needs to be more of a two person family, etc.

I also have not claimed anything for entertainment expense, because we could use his money.

Trust me when I say, even with not including some of my expenses I could to make the Schedule J be above $687 a month, I will have money left over each month, as on the 22C they are quite liberal with the amount they give you. I will survive more comfortably on Chapter 13 than without, and definitely better than doing a Chapter 7.

As for unsecured debt I would calculate (based off if the crappy car I returned files a claim with the court, which I was told they may not) then I am looking at probably $30,000.00+. Most are collections.

Also another positive is I hopefully would be able to purchase this house I live in via FHA in around a year or so in the Chapter 13 if all payments are on time (which they will be). This is great news, as I am renting this house (have for almost 3 years) from my mother... another reason my rent cheaper than amount I could claim. She is going to sale the house to me pretty much at her cost, which means I would benefit significantly. My payments would be less than $975 even with the PMI insurance. I would not have this opportunity without Chapter 13 as I would have had to pay off all my collections, which I could not have afforded.

[Pandora]

I have to question Pandora's math and agree with JB here.

If you write down that you have an additional $3000/year in income, that equates to an additional payment of $250 per month just so you can receive the lump sum each year. That is ridiculous if you're already having to withhold expenses to make your schedule J show a positive dmi. Commit to giving them your bonus each year instead, it equals the same amount either way. You might even get lucky, and they could let you keep it for free depending on your district. (we aren't required to hand over bonuses, tax refunds, overtime, etc. so it IS possible, but I don't know how common that is...)

Momofthree - you divided $3K by 12 do it over the course of 36 months or 60 and it works out. I was assuming since the OP stated this was a yearly bonus it would be counted in the 6 month pay. We had to do the same thing with our tax return this past year - couldnt exempt it, so had to "pay it back" in our plan to keep it. It was divided out by 60 months.

[Flamingo]

Thanks everyone. I will not include the bonus on my schedule I since it is not secure. I could technically file a Chapter 7 if I wanted to, even though I am over the median by quite a bit. A Chapter 7 will do nothing for me. The reason I am filing is that I have about $18000 in unpaid taxes. A Chapter 7 in my case could not help anything on that. A Chapter 13 will reduce it to about $14000.00 because it will make the penalties and interest on penalties (thanks JB for advising this earlier) moved to unsecured debt. I also want to cramdown my 2007 Jeep Commander as it only has 40000 miles on it, and has a Lifetime Warranty -- which I paid extra to cover all parts not just the PowerTrain. So I can keep this car forever. My payments on the Jeep right now are $599.00 a month which I have about 3 years left in payments. How I worked my figures, my Trustee payment would be about $687 a month which includes the taxes, Jeep, and attorneys fees. This is not much more.

The reason I can play with my figures is I have a domestic partner who is technically my "roommate". He deposits his money into my account as he does not have a bank account. So I have to figure what I am going to say his "rent" is -- before it was not a dead set figure. But I think I am going to show he contributes about $600.00 a month (which is fair since my rent is $975.00 a month and in my area I can claim $1150 I believe). But I could easily make his new official "rent" $400.00 a month.......

This would not be lying in my opinion because I will just determine the official amount and charge him that.... because I am only saying one person household even though his money before was also used for entertainment and food. I only put $450 a month for food, but spend more than that with him. I could claim more food and say that he pays more for rent but it includes food, therefore food budget needs to be more of a two person family, etc.

I also have not claimed anything for entertainment expense, because we could use his money.

Trust me when I say, even with not including some of my expenses I could to make the Schedule J be above $687 a month, I will have money left over each month, as on the 22C they are quite liberal with the amount they give you. I will survive more comfortably on Chapter 13 than without, and definitely better than doing a Chapter 7.

As for unsecured debt I would calculate (based off if the crappy car I returned files a claim with the court, which I was told they may not) then I am looking at probably $30,000.00+. Most are collections.

Also another positive is I hopefully would be able to purchase this house I live in via FHA in around a year or so in the Chapter 13 if all payments are on time (which they will be). This is great news, as I am renting this house (have for almost 3 years) from my mother... another reason my rent cheaper than amount I could claim. She is going to sale the house to me pretty much at her cost, which means I would benefit significantly. My payments would be less than $975 even with the PMI insurance. I would not have this opportunity without Chapter 13 as I would have had to pay off all my collections, which I could not have afforded.

The trustee will also be interested that you benefit significantly (see what I highlighted above) so before you make any further plans as to what you want to do, discuss with your attorney. Your trustee controls your financial house during a Chapter 13, not you, as much as people don't like to hear that. You cannot purchase or refinance a home during a Chapter 13 without trustee permission and the trustee has to approve any and all paperwork for both. Purchasing a home changes your assets during your Chapter 13 therefore your whole plan would probably have to be modified. Any major financial decisions that you want to make during your Chapter 13, discuss first with your attorney before proceeding as you can line yourself up for a dismissal.

[momofthree]

Momofthree - you divided $3K by 12 do it over the course of 36 months or 60 and it works out. I was assuming since the OP stated this was a yearly bonus it would be counted in the 6 month pay. We had to do the same thing with our tax return this past year - couldnt exempt it, so had to "pay it back" in our plan to keep it. It was divided out by 60 months.

Yep, if he gets $3k every year that he wants to be allowed to keep rather than hand over, and he includes it on his schedule I, then he'd have to include it in his monthly payment. So, $3k a year (12 months in a year) adds $250 to the monthly payment. Alternatively, you can look at it as an additional $15k over the course of 5 years that he wants to keep. Either way, it's an extra $250 per month. It would be easier to just offer up the bonus each year and let the tt take it as the end result is the same. AND there's even a chance the tt won't want it, so to include it on schedule I as an "expected annual bonus" just isn't in his best interest IMO, especially since he may not even get it in subsequent years. Hope that makes sense. It sounds like you were thinking it was just a 1-time bonus. ;)

[FishersMike]

Yes Flamingo - I would make sure I worked with my attorney to obtain Trustee approval before making any financial decisions during the plan. I was just assuming it would not be a problem to get approved if my payment was same/less than my rent. Of course if my Trustee wants to be difficult I would wait to purchase after the 5 years.

[Pandora]

.... It sounds like you were thinking it was just a 1-time bonus. ;)

Yep - you're right - I did