File 13 before or after annual bonus payment?

[TPPRAP]

I am planning on filing 13 in a few months. My annual bonus will be good this year due to unusual events, i.e. lightning in a bottle (net around $6K) but next year could be anywhere - zero, 1/2 that amount, up to that amount.

If the bonus is computed in my income going forward and drives a higher plan payment, I would be at risk of being upside down if bonus is less going forward. Double whammy would be if this year's bonus was taken by trustee.

Safest bet would be leaving bonus out of disposable income and turning it over each year to trustee. Is there anyway to do that going forward but keep some of this years payment for some cushion if I wait to file a few weeks or a month after I get bonus?

Thanks in advance for any advice - this forum is a great source of help and encouragement!

[Pandora]

You know what they say about Murphy..right?

Your bonus will come into play no matter which way you go I believe (back or forward). As to keeping any of it - unless you can exempt it - you'll more than likely be paying it back or handing it over. It's best to talk to an attorney before you do anything at all with it - they will advise you what the trustee in your area usually stipulates/requires.

Good luck!

[Lissy]

Well, I can only relay my experience. On the day that I filed, I knew that I was going to be getting a bonus, but I did not know how much it was going to be. I had only been with my company for a year at that time and had no prior experience to go on. Therefore, it was not included in my plan and my attorney was of the mindset that we would cross that bridge when we got there.

Two weeks after I filed, I received a pretty nice bonus (about $5k gross). I knew there was a possibility the TT would want it, so it sat in my bank account and I didn't touch it. My attorney advised me to just wait and see and let the TT ask. At my 341, the TT rep asked if I was an hourly or salaried employee. I answered salaried and his next question was whether I was eligible for bonuses. I replied that I was, but they were not guaranteed every year. He then asked if I had received one this year. I said yes and he asked me how much, I told him. That was it.

A few weeks after that, I received the TT's list of objections to confirmation of my plan and one of them was that my bonuses were not included. My attorney did nothing; he said he would only respond if the judge did not confirm. The judge ended up confirming my plan as is despite the TT's objections. So I got to keep my bonus. I think this is another thing that is district-specific in how it's handled, but if I were you, I would file before you get the bonus. Or wait to file until 6 months after you get the bonus, if you can afford to do that.

[justbroke]

I'd be worried, Lissy, because in Florida, you send in your Tax Returns each year. If the Trustee finds that the reported income is different enough (maybe a 10% threshold), they can and have sought modification of the Plan (Motion to Modify Confirmed Plan).

What you did right, Lissy, was to hold it and inform your attorney. This is precisely the right thing to do.

[Lissy]

Well, they already know about the bonus from last year because I told them at my 341. It shouldn't come as a surprise when/if they look at my 2010 tax return. I'm still not even clear on that; I've never seen anything that says I have to submit my tax return. I have an email in to my attorney, but there's nothing in my confirmation order or anywhere else that says I have to send it to the TT. How are you supposed to know if it's not spelled out somewhere?

[justbroke]

It would be in the Order confirming your plan. However, your attorney may have included your "average" bonus in the plan already. My bonus was included as it was in my 6 month lookback period anyhow.

For tax returns, that's different... My order has this language...

The debtor shall provide to the Chapter 13 Trustee all tax returns on an annual basis, to be received by the Chapter 13 Trustee no later than April 30th of each year.

All future refunds from the Internal Revenue Service shall be turned over to the Chapter 13 Trustee for distribution to the general unsecured creditors who have filed timely unsecured claims.

[Lissy]

Thanks! I have read my Order of Confirmation backwards and forwards about 10 times in case I missed it and it doesn't say anything like that. There is no mention of tax returns or refunds anywhere. I actually just called my attorney's office because he hadn't responded to my email and they said the same thing - if it's not in the confirmation order, you don't have to do it.

As for the bonus, my attorney did not include any average bonus in my plan. He couldn't have because there would have been no basis for it. I didn't find out the amount until after I filed and I had no history of bonuses prior to that.

[justbroke]

Very nice that you don't have those annoying words in your Order, and if they are not there... they don't exist!

[TPPRAP]

Thanks for sharing your experiences. Sounds like filing before, with full disclosure is best path. Meeting with my atty next week to decide on a game plan.
My biggest concern is having to put estimated bonus in my plan then not getting anything. That could get me upside down a lot faster than the challenges of grocery and living expenses.

[TPPRAP]

Looks like the bonus is coming sooner than expected so it will be before filing. Doesn't the recent Hamilton vs. Lanning (might be off on the names) cuourt ruling say disposable income should be forward looking.... I am thinking I would be ok if we include a bonus based on reasonable expectations...hoping

[momindebt]

In our area, if we had filed after the bonus, it would be counted as income and would up your 6-month salary. They didn't care what we were going to make next year so much as long as we had jobs, as they did what we were making right before filing. If we filed before receiving the bonus, we are required to announce any "found" money over $500 anyway. Whether the trustee/judge take it is up to them but happens regularly in our area. Stinks either way-how funny that getting a large sum of cash can hurt you in BK world, lol!