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Can I Keep My Bonus In Chapter 13

Can I Keep My Bonus In Chapter 13?

You can keep your bonus in Chapter 13 provided you account for it in your Net Disposable Income allocated to creditors. When you file Chapter 13, your payment is partly based upon your “Ability to Pay” your creditors. Your ability to pay your creditors is determined by providing the court with a monthly budget: income minus expenses.

Generally speaking, additional funds that come into your ownership during Chapter 13 are property of the bankruptcy estate. As such, your Charlotte bankruptcy attorney will seek approval for you to keep those funds if possible. In the case of a bonus in Chapter 13, so long as you have already accounted for the bonus in your monthly income and expenses calculations, you can keep the bonus. Your Chapter 13 bankruptcy attorney will work with you to do this. Lastly, the way to account for the bonus is to simply take the average bonus, divide it by 12 (months in the year) and add that amount to your gross income calculations.

Can I Keep Tax Refunds In Bankruptcy?

Tax refunds are not “income earned in the last sixty days,” and as such, they are not exempt assets under NC sec. 1-362. If you have exemptions remaining under NC sec. 1C-1601(a)(2), you can protect your tax refund with that exemption. That exemption is commonly known as the “Wild Card” exemption and can be applied to any assets.

In a Chapter 13, you must petition the court to keep your tax refund. Generally speaking, each debtor will be able to keep the first $1,000.00 of a tax refund. If your refund exceeds this amount, you will need approval from the court to keep it. Your Chapter 13 bankruptcy attorney will assist in notifying the trustee of your refund, and providing an explanation as to why you should be able to keep it. In most cases, if you have a list of home improvements or vehicle repairs which need to be done, you can allocate the funds to those items. It is quite common that you can keep your entire refund in Chapter 13, based on this analysis.

Bonus Not Yet Earned

You may be wondering if you can keep a bonus in Chapter 13, if you have not already earned the bonus.If you have a potential bonus which you have not yet earned, there is good case law which supports the contention that those funds are not part of the bankruptcy estate and therefore they will be yours to keep. Our firm, together with The Law Offices of Kevin Radey, won a case on this very issue, in the Western District of North Carolina. You can read that case summary on Bloomberg Law.

Speak With A Charlotte Bankruptcy Attorney Today

If you’re considering filing Chapter 7 or Chapter 13, speak with an attorney today. Bankruptcy is a powerful solution which immediately affects your life for the positive. You can reach us at 704.749.7747 or click to request a FREE CASE EVALUATION and we will reach out to you.

benefits of chapter 7

Can I Keep My Bonus In Bankruptcy?

If you are paid a commission or bonus through your employer, a key question when filing bankruptcy is whether you can keep your bonus when you file a bankruptcy. If certain factors are met, the answer is yes, you can keep your bonus in bankruptcy. Our firm litigated a case in the Western District of North Carolina in 2017 which addressed that exact issue. You can find a link to the story about the case published here on Bloomberg Law.

Is My Bonus Part Of The Bankruptcy Estate?

Whether a bonus is part of the bankruptcy estate, and potentially at risk of being paid over to the Trustee, depends. If the bonus has already been received and is sitting in your account, then yes, it will need to be addressed as an asset of the estate. If the bonus is earned, but not yet received, the answer is the same. However, if a bonus is earned but the payment of the bonus and the amount of the bonus remain in the discretion of the employer, your bonus may not be an asset of the bankruptcy estate.

The Timing Of Your Bonus Is Important

The snapshot for determining the answer to numerous questions regarding your bonus is the day of filing. If, on the day of filing, your employer still retains discretion as to whether to pay the bonus, then you have no vested rights in the bonus. For the purpose of bankruptcy, this is merely an expectation of a bonus. Case law supports the conclusion that a mere expectancy or hope of a bonus is not an asset. Therefore, the bonus would not be part of the bankruptcy estate. While your employer may in fact end up paying the bonus, if at the time of filing you had no legal right to it, then it should not be included in the bankruptcy estate.

What Would Change This Answer?

If prior to the day of filing, your employer communicated to you that you have earned a bonus and the bonus will in fact be paid at a later date, this would most likely dictate the bonus is an asset of the estate. If the bonus was small enough, you could use one of your bankruptcy exemptions to protect the bonus. Depending upon whether you could prove when the bonus was earned, you may also be able to protect some or all of the bonus under the earned income exemption.

How Is A Bonus Different From A Commission?

In this context, the imagined bonus is one which is at the employer’s discretion. A commission is typically calculated and generated upon a mathematical equation, and upon a certain event—conclusion of a sale, signing of a contract, etc. Presumably, the same questions would arise concerning a commission. If the commission was earned at the time of filing your bankruptcy, it would be an asset of the bankruptcy estate, whether you had been paid the commission yet or not.

Speak With A Charlotte Bankruptcy Attorney

If you are considering filing a bankruptcy, speak with a Charlotte bankruptcy attorney today. You can call us at 704.749.7747 or click HERE to request a call. We know you have choices. We hope you choose to Recover With Us.