Going back to work after 341 but before discharge

[WC Nurse]

Our 341 is scheduled for 5/6/09. My husband has been out of work for 10 months, since 6/19/08. He is a union carpenter and has been on their out-of-work list since he was first laid off. When he first got on the list, he was #350 and is now down to #40. I anticipate that he'll be called back to work sometime in June, but there's no telling how soon the list will move.

I sent my attorney an email asking if it would affect our bankruptcy if he went back to work AFTER the 341 but BEFORE discharge. He replied that it could affect us if the trustee asks for paystubs and sees that he's back to work.

What are the chances of that happening? Do they do this right before discharge to see if people's situation has changed? I'm afraid they'll force us into a Ch. 13. Does anyone have any experience with this? We can't wait until after the discharge for him to go back to work. From what I understand, Riverside is so backed up that it will take over 60 days...someone on here posted it was over 115 days! If he gets called back to work and doesn't take the job, he'll have to go to the end of the list and start all over. Any opinions or experiences anyone would like to share?

[chad9162]

Well the "real question" is will the additional income disqualify you from Chap 7.

Most people here agree that income for the means test is the average of 6 months preceding filing date (month). This date also establishes your BK Estate.

From my understanding anything after that date is NOT part of the BK Estate and NOT considered so I don't see how additional income could count.

The only thing I can think of is that since you knew before the filing date that he was going to get a job in the future then it can be counted in the BK Estate. Its kind of like a law suit settlement. If you are involved in a lawsuit prior to the filing date then theoretically its part of the BK Estate.

Personally, if they count the income against you its stupid. There are people who are unemployed and file BK. Do the trustee's really think they're not going to get a job in the future?

I'm curious why your attorney said it "could" affect you. My attorney explained to me that they had to set a standard somewhere regarding income. He told me additional income would not affect my BK. He said the law is the "standard." Sometimes the "standard" benefits the creditor and sometimes it benefits the debtor. My wife only works 9 months out of the year, but since we are filing soon we won't benefit from those non-working months.

Maybe your district is "tougher" I don't know.

[lrprn]

From my understanding anything after that date is NOT part of the BK Estate and NOT considered so I don't see how additional income could count. ... I'm curious why your attorney said it "could" affect you. My attorney explained to me that they had to set a standard somewhere regarding income. He told me additional income would not affect my BK. He said the law is the "standard." Sometimes the "standard" benefits the creditor and sometimes it benefits the debtor. My wife only works 9 months out of the year, but since we are filing soon we won't benefit from those non-working months. Maybe your district is "tougher" I don't know.

There is case law by district that 'tilts' the interpretation of significant added income after filing a Ch 7. Although most districts and local courts set the filing day as the day the filer's bankruptcy estate is set in Ch 7, some local courts and trustees do pay attention to changes in income after filing but before the 341 occurs.

If the trustee inquires about changes since filing and the filers (like this case) now have additional income, if that income earned after filing is sufficient to create sufficient disposable income to push the filer into a 13, or if the additional income puts the filers over their state's median income, then the trustee can file an objection to force a reworking of the Means Test and Schedules. This is court- and situation-specific, so having a very knowledgeable and experienced lawyer to advise in this situation is crucial.

The current bk law states the Ch 7 bankruptcy estate is set on the day of filing. Case law interpretations in some districts have opened this up to include some instances of "future" income in certain circumstances. Everything boils down to how the local bk court judge and the assigned Ch 7 trustee interpret "future" income in a Ch 7.

Personally, if they count the income against you its stupid. There are people who are unemployed and file BK. Do the trustee's really think they're not going to get a job in the future?

No one said the law always logical. Remember, most trustees agree that the bk estate is set on filing day and what happens after filing is irrelevant.

In situations like this one with significantly increased income shortly after filing, it's all about district and local court case law precedents with their interpretations. That automatically builds in potential differences between districts, courts, and even trustees as each interprets the law in the way they feel is correct. Welcome to the practice of law in the USA.

[WC Nurse]

I could see if the additional income was after filing but BEFORE the 341...but it will mostly likely be 1 1/2 months AFTER the 341 meeting (scheduled for 5/6/09). The out of work list is moving very slowly....I'm just guestimating that he'll be called back to work in June. By the time he finally gets called back to work, it will have been 12 months of unemployment for him. I'm curious how often the trustee will ask for paystubs AFTER the 341 meeting. Has that happened to anyone before....where a month or 2 after the 341 the trustee asks for paystubs?

[brick]

Irprn, thanks for the insight. I put up my own question as a new thread today regarding returning to work before 341, as I have received different views from different lawyers. I agree with you that this income/employment after filing issue appears to be handled differently district to district even though the Bankrupcy Code set the filing date as the "commencement" day of the BK estate.

My question is in the case of TT objection what are the possible outcomes, since my wife took a job after we filed jointly in early April and our 341 is upcoming in May. Would the following sequence be possible:

1. TT won't bother with income after filing...(we wish)
2. TT files an objection and a new Means Test makes us ineligible for Ch 7, in which case we can challenge and have a hearing before a BK judge.
3. The court decides against us and converts into Ch 13.
4. We refuse, as Ch 13 has to be consentual.
5. Ch 7 is dismissed.

What I am trying to get to is what is the worst case scenerio, e.g. after landing a hard-found job we are back to square one and try to settle the debts out of court?

Thank you so much

BTW we are in New York