What Happens to Paycheck received after date of filing ?

[dakota112]

My wife and I are planning to file CH 7 on Jan 6, 2010. We are under the means test and will be negative for at least a 1000.00 in disposable monthly income. My question to anyone out there who may have some insight into this is can the income that was earned in Dec 2009 ( about 5,500) be counted in the 6 month snapshot lookbackperiod of July 1, to Dec 31, 2009 even if I don't get paid until after I file? And also does the trustee take 25% of these earnings? This is all so confusing and it seems arbitrary. One still needs to work and survive and pay bills during this process so it seems there will always be that one month which is hanging out there in limbo. I appreciate your responses. HAVE A GOOD NIGHT.

[MSbklawyer]

If I understand your question, what you're asking is "does current monthly income include income earned but not yet received"?

Good question!!

11 U.S.C. 101(10)(A) defines current monthly income as "the average monthly income from all sources that the debtor receives . . . during the 6 month period[.] [Emphasis mine]

So I think you have a damn good argument that income that you are owed but that has not yet been received as of the date of filing, is not included in CMI.

Now, why do you think the trustee gets 25%? That's a whole other question.

[dakota112]

The reason I bring it up is that the income I received in July 2009 which is part of my means test calculation was earned in June of 2009 but not paid to me until July 9th 2009. I get paid once a month, so it would seem logical to me that income earned in Dec of 2009 but not paid until after the filing date in Jan 2010 should not be included as part of the BK estate. You would think they would have some hard rules to go by. This arbitrariness and whatever the local may be ( I'm in AZ) is just crazy. Again I thank all of you for your input, knowledge and experience in these matters.

[Amy26]

None of my pay was taken.

[MSbklawyer]

If you are owed income that has not been received, then, like everything else, if you want to keep the trustee from taking it, you have to find a way to exempt it. That will depend on your state's exemption laws.

As for the arbitrariness, welcome to the law.

"A man who loves sausage and respects the law, should never see how either is made." -- I don't know who said it.

[dakota112]

Not being an attorney or an expert in current bankruptcy laws, I think the best way for me to proceed is to delay the filing by a couple days, get the paycheck cashed out and pay "necessities" with it like 6 months worth of food. What would be the point of working the month of december( the 7th month of income) and handing it over to the trustee and then trying to figure out how I'm going to pay my bills for the month of January or get thrown out on the street and homeless? I suspect this process of BK has made many a family homeless in America ! It is very sad especially since the laws are written by people who are rather corrupt themselves and are powerful and connected enough to make the rules of the game work for themselves. God help us all.

[MSbklawyer]

Not being an attorney or an expert in current bankruptcy laws, I think the best way for me to proceed is to delay the filing by a couple days, get the paycheck cashed out and pay "necessities" with it like 6 months worth of food. What would be the point of working the month of december( the 7th month of income) and handing it over to the trustee and then trying to figure out how I'm going to pay my bills for the month of January or get thrown out on the street and homeless? I suspect this process of BK has made many a family homeless in America ! It is very sad especially since the laws are written by people who are rather corrupt themselves and are powerful and connected enough to make the rules of the game work for themselves. God help us all.

Why don't you hire someone who IS an expert in current bankruptcy laws? A good bk lawyer. You'll save more than you spend. I can almost promise you.

[Never_Again]

Your income that is paid in January is not part of the lookback period. It is only income to you when received. I suppose, if you want to get technical, it is a receivable, and therefore an asset. However, if you take that approach, July's paycheck would not be income, as it was simply receiving a receivable, that was earned in June. So, you would gain a month, and lose a month... the result is too close to the same to matter, and most trustees are not going to want to bother to split that hair.

As part of filing, I gave my lawyer my last six months of pay statements. That was my income. I also do not know where you got the 25% of your salary that the trustee will take?

I would hire a lawyer as well. My lawyer, filing fees, and "classes" ran $1400. This is a complicated process, and it helps to have someone navigate this for you. They know the law, and know how to legally protect assets.

[Amy26]

I also heard they would take 25% of your paycheck if your pay period fell in between your filing date.

IE: I get paid on the 15th and the 30th. However, our pay cycles are 1 pay period behind.

So, when I got paid on June 15th, 2009, the pay period was May 15th-May31st. I filed on June 10th... I had to provide my trustee with pay stubs that showed the PAY PERIOD through my file date. So, even though I gave them all my pay stubs before I filed... I still had to provide pay stubs long after I filed so they could see my pay periods up to my file date.

With that said, the trustee could have taken part of my pay because the income was technically for the period BEFORE I filed even though I didn't receive it till afterward.

However, this was not an issue and they did not take anything from me.

[tdawg]

boils down to "are bonuses you receive after filing exempt?"

Just to chime in here, I have kind of a similar situation. I am being laid off October 31. I am planning on filing in early October. As part of the layoff, I'm going to be getting severance and a transition bonus. It's a couple months pay, so I'm quite interested in the answer to this. So, I was wondering if I would have to list that as an asset. I guess it comes down to is a future bonus that you know you will be receiving AFTER you file an asset?

My attorney's assistant (I know I shouldn't listen to her) said that I would have to claim it as an asset because I know I will be receiving it. I think I know where the OP got the 25% from. I Washington state (and probably others), 75% of your income is exempt (according to the chart I saw). I'll post what my attorney says when we file.