Bonus after file, but before 341 - Pls help!

[starting_over]

I searched and read other posts on "bonus" and am not entirely sure what I should do. So my apologies if this is redundant.

I filed on July 14th for Chpt 7. My 341 meeting is scheduled for Aug 21. I just found out today that I will be getting a $5000 bonus. After taxes that should come to something around $2500 I think.

I have direct deposit and am wondering if it's bad to switch to paper checks so that the regular income & the bonus don't automatically show up in my checking account.

Is it better to get them via paper, deposit the regular paycheck & hold onto the bonus check?

As I understand they are really concerned with your income for the 6 months up until filing. However, it seems they also ask questions about income changes etc. at the 341 hearing and they might ask about a bonus.

Bonuses at my company are discretionary and not everyone always gets them. They are based on company & department performance as well as individual achievement.

I'm wondering if I should leave my direct deposit alone & just let the regular paycheck & bonus go into my checking act or if I should switch to paper checks & just hold onto the bonus check & see what happens.

Advice anyone? I'm doing this pro se (without attorney). My income is above the median in NV, ( I think the median is around 46,000 and I earn 52,000 now) but after filling out the means test ... I still qualify for chpt 7 and there is no presumption of abuse.

Hopefully, I did my paperwork thoroughly and correctly enough that there is no issue. The only weird thing on my paperwork is that my house mortgage payment & second comes to $1900 a month & the allowable amount for mortgage in NV is $1000. So explaining why I need to pay $900 more than the IRS allowed amount could be tricky. I am really trying to keep my home, even though there is no equity in it & I'm upside down on it.

Please let me know what the best thing to do is and what I can / should be prepared for.

Thanks in advance.

[abp559]

The UST showed up to my first 341, but neither the UST nor the regular trustee asked about any bonuses (I hadn't received one before the 341, but was about to receive one shortly after). They did ask for bank statements up to the date of the 341, though.

As for the mortgage, our house payments were about $1000 over the standard (thankfully we still have some equity) and neither trustee seemed to worry about it. We did get asked if we were current on our secured debts. I think the point is, if you stopped making those excess payments you may no longer pass the means test. Since you are upside down they may ask a few more questions about that. Would you pass the means test without that extra $900? If not, how close is it?

I would not try to hide the bonus. If they ask about it, tell them (truthfully, I hope) that it is an employee incentive bonus and that you had no right or expectation of receiving it at the time you filed. If that's the case, then it's not part of the estate. I had a few things I really wished I didn't have to disclose, but I let it all hang out and it looks like we're going to come through ok. If they get suspicious that you are hiding something, I expect things will get much more difficult.

Caveat - I am not your lawyer, and this should not be considered legal advice. :-)

[starting_over]

Thanks for sharing your experience. I guess I'll request that my direct deposit be stopped & start getting paper checks. Then, if the trustee asks, they ask & I will answer whatever she asks me about.

I would not be surprised if she asks since the last two years I did get a bonus, but I was in Sales then & it was much larger. I am no longer in sales & didn't know if I would or would not get one.

[FreshLikeADaisy]

StartingOver, because you're doing this pro se and don't have an atty to ask, I'll give you my thoughts, but I REALLY would like for you to weigh your options carefully, regardless of what you hear, because this can vary from trustee to trustee and district to district. I also think this would be a great time to use a few free consults, just to hear what they say.

There is a clause in the new bankruptcy law that says a change in post-filing income can be considered by the trustee. (I'll try to find that reference for you, but if you look at Schedules I & J you'll see where they ask about it.) In addition, trustees have been known to count post-filing income in "totality of circumstances" objections, and to require that a person who receives sizeable post-filing income either settle the estate or be charged with bk fraud: this happened to a NY state lottery winner (last year, I think) who had just filed bk prior to winning and then completely forgot to notify the court, and so was threatened with fraud charges. So it's nothing to screw around with, especially pro se. Don't take any advice (including mine) until you've researched it thoroughly yourself and understand the various pitfalls of each course of action.

All that said...

First, the safest course of action all around might be to contact your employer, tell them you are trying to settle some legal issues, and ask if they can hold off paying the bonus for at least a few weeks while you get your bank accounts straightened out. They may be able to accomodate you in this way. Don't feel as though you have to give any further info; "personal legal matters" is all you need to say.

Obviously, the benefit of this approach is that post-341 income tends to be safer than pre-341 income, if only because the trustee is not looking through your finances with the same scrutiny after a strightforward, no asset 341. But don't make the mistake of thinking that there is some rule or law that makes post-filing/pre-discharge income safe from the trustee. There is none, only a *decreased chance* after the 341 that it will be an issue for you. So that is the first thing I would try.

Assuming your employer isn't amenable to holding back on payment, or for some reason you don't feel comfortable with asking them, I personally would not do anything to try to disguise the payment itself or the fact I had received it, because that's the kind of thing that will come back on you. Trustees are well trained and well practiced in finding hidden assets, and part of that is simply looking for asset-hiding behavior, which your attempts to conceal the pmt would be. So don't. Don't ask for a paper check, don't wait to deposit it, just let it come through and wait for the trustee to say what he will. Why? Because if he does find out about it later, and then gets a copy of the check, it will be instantly clear that you were trying to conceal it. That's much worse than just losing the bonus.

After the check has been deposited, say nothing, go to your 341, and be prepared to answer all questions honestly. Many trustees DO inquire about post-filing income in a Ch7 (again, to determine totality of circumstances and the possibility of fraud) and some will ask whether you receive bonuses, or if your pay has changed since filing Ch7. Be prepared to answer these honestly.

Let's say, hypothetically, that I were in your shoes and the trustee missed the post-filing bonus deposit, but got me on the questions. He then sent me a letter stating that he considers that bonus to belong to the bk estate. I would then submit an amendment to Schedule B declaring it an asset, and exempt it in Schedule C at the same time with whatever exemption dollars I had left: keeping part of the bonus is better than keeping none.

I too was a pro se filer, and in the end my successful bk was worth far more to me than any asset I may have owned. If you end up losing the $5k, but having your debts discharged successfully, I still think you're way ahead. So don't let the temptation to hide this asset or go out of your way to protect it from the bk trustee by questionable means put your bk in jeopardy. You've come too far to have your bk overturned, and possibly worse, over an amount that was far less than your total indebtedness.

I'm sure you'll hear from others; this is my take on it for what it's worth. Good luck to you!!!

[abp559]

I agree with Daisy. Don't do anything that's going to look like hiding assets. You'll lose a little sleep worrying about what you're going to do if you have to give up that cash, but you would lose a lot more sleep worrying about getting busted for fraud (which may kill your BK at best or land you in jail at worst).

[starting_over]

Thanks for all the advice. I just kind of screwed up by not switching from direct deposit to paper checks earlier ... I didn't know for sure that I would or would not get a bonus, so I didn't think it through clearly. My main concern is not whether I can keep the $2500 (after taxes, b'c before taxes it's $5000) it's how it woudl affect my BK. You all absolutely correct that loosing that money is no big deal compared to dealing with the $70,000 in debt I am dealing with. I spoke with my employer and they said it was too late to stop the bonus from direct deposit but that they woudl try to put a stop payment on it with ADT tomorrow. Is that worse?

I honestly have no idea what to do ... I just want to do whatever would make the bankruptcy go as smoothly as possible & now I think I've screwed things up. I'm not sure if it's worse if the stop payment goes through & then it shows on the bank statement that money entered & then left ... I just don't have a clue. I will DEFINATELY be honest if / when trustee asks about bonus etc. I'm just so worried about what I"m supposed to do / not do. I thought it would be better to have a paper check & not mention it if not asked about it. Oh, well. Now I just wish I'd left the whole thing alone.

[starting_over]

Should I tell my employer to cancel the stop payment tomorrow morning, if it's not too late, & just let it depsoit into the act as it normally would with direct deposit?

Or should I just let things be & wait until my 341 and answer whatever they ask?

[msndsy]

We were told to bring current paycheck stubs and bank statements to our 341 meeting, but the trustee didn't ask anyone for them. Just about 5 questions and we were done.

[Yankeegirl]

Do you have any exemptions left?

This exact scenario happen to us last year when we filed. We called our attorney and were able to exempt the funds. She just filed an amended schedule with the new amount. However, it never came up at the 341 meeting.

Regarding your question about the mortgage payment. I haven't seen a case where the UST has questioned the amount of your mtg payment and I think there's another post by someone asking this same question.

Remember, you get to deduct the IRS housing standard deduction for your region. This is NOT the maximum mtg payment - just a standard deduction.

If you have a mtg payment that is higher than the standard, then you end up deducting the higher mtg payment (not both). Providing you don't have any equity or have the exemptions to cover the equity, you will usually make out better on the means test if you actually have mtg payment vs. a rent. In fact, our UST advised us (off the record) that we should dismiss our case, buy a new house, and then refile so that we could pass the means test!!!

[starting_over]

Thanks for all your advice & comments.

[starting_over]

There are no wildcard exemptions in NV. As far as money goes, I believe we are allowed to keep 75% of earnings from work. I dont' know if a bonus is considered earnings from work or not. It would be nice to be able to keep the money, of course.

My main concern is not whether I can keep that $ or not; it's how it affects the whole bk & my eligibility to do a chapter 7 & have it all go smoothly.

[starting_over]

http://www.leg.state.nv.us/NRS/NRS-021.html#NRS021Sec090

[soleprop]

well how'd the 341 go? did i miss it in another thread? glad to see there was a wildcard for you, but curious if the trustee had anything to say re: the bonus at the 341 - thanks!

[starting_over]

341 was ok

341 was ok. Not great, not terrible. No questions about employment/wages.
Was pretty quick. Many many people in the room, some with attorneys, some without. Only questions about mistakes on schedules, exemptions, what property/items sold in last year, etc. Have to re-submit corrected forms, with updated / corrected exempiton laws etc.

Thanks for asking!