Bonus before filing

[Lanph]

We were planning on filing chap 7. I am due to receive a bonus a few weeks before the date we are planning on filing. We are over median but according to our lawyer we squeak by because of expenses.

Our lawyers plan is to file and tell the trustee that this is not standard income and we have this extra money available. We really would prefer to file chapter 7 and are worried that the trustee will push us into a 13 because of this extra income. Has anyone been through a similar experience. This is in Wisconsin

Thanks for any help or advice

[Freddy03]

We were planning on filing chap 7. I am due to receive a bonus a few weeks before the date we are planning on filing. We are over median but according to our lawyer we squeak by because of expenses.

Our lawyers plan is to file and tell the trustee that this is not standard income and we have this extra money available. We really would prefer to file chapter 7 and are worried that the trustee will push us into a 13 because of this extra income. Has anyone been through a similar experience. This is in Wisconsin

Thanks for any help or advice

I'm in FL but had to wait until July to file b/c DH received a bonus in Dec that would have pushed us into a 13.

[LadyInTheRed]

Lanph, I hope you plan to file in February so your bonus doesn't show up on the 6 month look back on the means test.

ETA: I'm assuming you'll receive the bonus in February. If you won't receive the bonus until March, it wouldn't show up on a means test if you file in March. The 6 month look back ends the calendar month before the month in which you file.

[btbeme]

My opinion, based on many posts in these forums...

Being over median income is OK, so long as your expenses qualify you for a Ch 7 on the Means Test and your expenses are allowable (meaning not enough extra at the end of the month to force a Ch 13). Trustees seem to be locking down pretty hard of expenses if you are close to a Ch 13. Adding in a bonus, whether before or after filing, may be the straw that breaks the camel's back and triggers that extra interest in your filing.

While a bonus before filing means that it will be added to your income, you may be against the wall at your 341 if you file BEFORE taking the bonus if you are asked about any expected income not noted on your filing. Neither case is very much fun, as it puts the onus on your attorney to make the case for Ch 7 vs a Ch 13 and the Trustee will likely take a serious interest.

So, go over your expenses carefully, and see if there are she you can use that are not being considered now. The phrase "just squeak by" makes me nervous when all a Trustee has to do is disallow an expense to make that squeak go away.

The only other consideration would be to take the bonus and then wait 6 months for it to fall off the back. It can be done. Or, grow an expense, like a small lien on a vehicle (giving you the payment expense in addition to your auto expense). Just thoughts...

[doni49]

But that "small lien" you suggest would involve borrowing money. The trustee is going to expect an accounting of where that money went.

If there's a lien with no actual loan, then it's BK fraud.

[btbeme]

But that "small lien" you suggest would involve borrowing money. The trustee is going to expect an accounting of where that money went.

If there's a lien with no actual loan, then it's BK fraud.

Exactly. So show where it goes and make sure the lien is perfected before filing

[doni49]

and the other thing is that if you want to keep the car that now has that lien, you're going to have to reaffirm the loan. So make sure you can afford the pmts.

[Lanph]

We just waited 6months because of a preferential payment situation that happened last March before we were even thinking of filing. I will get the bonus before I can file no way around that. We are getting garnished now so waiting another 6months would cost us more money. The bonus is approx $7000 gross or $4300 net. How would I be able to offset that with a car loan? We have a car loan on a car we owe about $1800 and our payment is approx $200 The car is older and I wouldn't mind trading it in and getting a better one.

[LadyInTheRed]

We just waited 6months because of a preferential payment situation that happened last March before we were even thinking of filing. I will get the bonus before I can file no way around that.

But, if you file in the same month in which you receive the bonus, the bonus won't be part of your six month look back. So, you can get past the presumption of abuse. Then, if the trustee makes an issue of the bonus, your attorney plans to argue it was a one time bonus that is not enough to support a totality of circumstances objection. If you are worried, talk to your attorney about the likelihood of success and ask about other ways that you may be able to prepare for an objection. It sounds like you have a decent attorney. Let him do his job.

[Lanph]

That is the problem the preferential payment 1 year deadline does not expire until March 7. I will receive the bonus Feb 15

[LadyInTheRed]

That is the problem the preferential payment 1 year deadline does not expire until March 7. I will receive the bonus Feb 15

Got it. I take it the preferrential payment was to an insider.

So, do you "sqeak by" on the means test even with the bonus? Or was that before the bonus?

[LadyInTheRed]

We are getting garnished now so waiting another 6months would cost us more money.

Would it cost you as much as being in a 60 month Chap 13?

[AngelinaCat]

We get a yearly stipend from a Retirement instrument each January. Even though that fund is exempt, once it came into our hands, it became 'income'. Therefore we had to wait at least until six months had passed since receiving it before we could file so that amount WOULD drop off the six month look-back.

[Lanph]

Got it. I take it the preferrential payment was to an insider.

So, do you "sqeak by" on the means test even with the bonus? Or was that before the bonus?

We squeaked by before the bonus. The preferential payment thing was a joke. We borrowed money from my inlaws to pay off a 401k loan, so we could take another one out again right away with the agreement that we would pay them back right away. We weren't even talking about filing at that point. In fact we wouldn't have even taken the loan out if they couldn't have loaned us the money to pay it off that way.

[Lanph]

Would it cost you as much as being in a 60 month Chap 13?

That I do not know. We will be sending everything to the attorney again, and hopefully we can figure out how much a 13 might be. I just don't want to worry about dealing with the trustee for everyone of our financial decisions for the next five years