Income after filing

[kathy4530050]

Does anyone know if there is any kind of ceiling on the income you can earn after filing? I'm looking to file in October, and there is a possibility that I could have a pretty big check come in from a client before the end of the year.

[AngelinaCatHub]

Not knowing anymore than you stated, as like, how big a check, I would file before such a thing happens and before your 341, for sure. 'Hub

[kathy4530050]

I'll be negotiating with this client within the next couple of months and, if we are going to come to an agreement (no guarantee) , I should be able to forestall payment until after I file. I am concerned, though, that the payment might be pretty big (50k or so) and if I file in October and get this payment, say, in November, do you see any problem?

[lrprn]

I am concerned, though, that the payment might be pretty big (50k or so) and if I file in October and get this payment, say, in November, do you see any problem?

Technically your bk estate is set on the day you file, but case law decisions have opened the Pandora's box of looking at big increases like you describe before the 341 meeting. Also there is one case of a person who filed Ch 7 in New York, then hit the lottery before their case was discharged. The court found out about it and re-opened their case. The filer was forced to pay back all their creditors in full with the lottery winnings. (They had plenty left over though )

With a potential income payment this big, you absolutely must be sure to receive the $50K AFTER your 341 meeting. That way if your trustee asks you during your 341 if your income has changed since filing, you can truthfully say no. (And yes, our trustee asked us this very question during our 341. It's a fairly common question to be asked.)

Also some trustees will ask you to bring a copy of every paycheck or income check you've received since filing to the 341, so this is another potential problem area for you if you get the check between filing and your 341. Better to be safe than sorry. There's not a trustee in the US who wouldn't be drooling over $50K.

If you are planning to file with a lawyer (and given what you've told us I hope you are), he/she can tell you how to best handle this tricky situation.

[kathy4530050]

Thanks lrprn for all of the good information. I give this a 50-50 chance of happening. If it DOES happen, my client will likely need to pay me out of their '09 budget. BUT, the control that I have is WHEN I invoice. We may even come to some agreement earlier than that, but I don't have to invoice right away. And this income would be the result of a licensing agreement (I license the client to use my intellectual property), so it's not as if I am performing work. I understand that there is a problem if I invoice much later than work is performed, but no work is being performed.

Here's a followup question, but I think I know the answer. How long do you think I can I hang on to a payment before depositing it? That's another way I can buy time, but I think you're going to tell me that I have to deposit it when I receive it, right?

[lrprn]

And this income would be the result of a licensing agreement (I license the client to use my intellectual property), so it's not as if I am performing work. I understand that there is a problem if I invoice much later than work is performed, but no work is being performed.

It doesn't matter that it isn't actual work - it's income, and that's what matters.

How long do you think I can I hang on to a payment before depositing it? That's another way I can buy time, but I think you're going to tell me that I have to deposit it when I receive it, right?

Truthfully I don't know what's in your best interests to do about the timing for depositing the check. This is an excellent question to ask during your 3-4 free initial consultations with experienced bk lawyers in your area. There's no obligation, so you could set those up now so you can effectively pre-plan for your bk in October. Pre-planning your bankruptcy is perfectly legal and is the smart thing to do. It will help avoid the too-late "if I only had known"s.

[kathy4530050]

Yup. You're right. Time to make appointments with a few more lawyers and get a few questions answered and issues settled. Thanks a bunch!

[dingdong]

I believe, if I remember my contract law class correctly, the UCC applies and checks are usually good for at least 6 months.

It has something to do with the length of a stop payment order on a check being in effect for 6 months I believe. So you should effectively be able to hold a check for 6 months unless there is some other clause written on the check which makes the check valid for a shorter period. (i.e valid until ...)

Some banks might even honor it past the 6 months if they don't notice the date ( deposit through an ATM and the date isn't noticed)

[kathy4530050]

Actually, my concern is that I might hold on to a check for a couple of months, deposit it, and then somehow be accused of hiding an asset if this were to be discovered. Could it be?

[Trixie007]

When you file, I think you have to declare any pending monies, so definitely check with attorneys. I have a pending commission check (earned last year) that I don't know when I will receive, I'm having to cover it with our exemptions. Seems to me that if you know it's coming you have to tell the Trustee or you may have problems.

[OhioFiler]

I would think check is an asset subject to normal rules. The trustee could look at your accounts receivable as well if you've already invoiced the client.

Definitely find an attorney who has experience with small business bankruptcy.

Is your intellectual property an asset as well? The license becomes one for the client when it is purchased from you.