Rules for earning income after a chapter 7 discharge

[limping805]

I wanted to know if you start making money after your Chapter 7 is discharged, will the courts have access to your wages earned. What would happen if I start a business and it was to do really well in the next 90 days? Is it possible to have the courts reverse your Chap 7 filing if your revenue increases (lets say 75%) in the next 5 months than what I was earning at the time of my filing. I will be paid as a 1099 independent contractor to a C corp I had formed about 30 days ago with a business partner with its own Tax ID Number.
Do they monitor your income for a period of time after the discharge? What if the income is not reported to your SS # but paid to a corporation and deposited into the business account.
What is a safe time to make sure you don't find myself in hot water. My case was discharged today

I would appreciate any input or advice.
Thanks

[Meatstick]

If you started this business or were paid any wages between your filing and before your 341 I believe you are required to inform the TT before/during your 341. If anytime after your 341 you are paid wages or start a business the funds are yours free and clear.

I am used to doing contract work on the weekends in addition to my regular job, but with being over the median income I have not been securing any contract work to try and shrink as close to the median as possible. It still doesn't get me under the median but allows me to pass the means with ease. Per my lawyer, he said anytime after my 341 I could start looking for more contract work and I would be safe.

But beings is your discharged I think you have nothing to worry about. I am sure others will chime in.

Good Luck !

[fltoo]

You can make a million dollars, even win the lottery, and no one can touch it.

Some things are available to them, inheritances for one, and can't remember exactly what the other one is now. Someone with a better memory than mine will chime in soon.

[justbroke]

Yes, you can win the lottery, but there are some things the United States Trustee (UST) can do to dismiss your case. It's called the totality of circumstances. Most Districts have ruled that events occurring post-petition (after filing) can be considered.

Okay, so there's a distinction between what's property of the Estate and what the UST could consider in a motion to dismiss. First, as fltoo wrote, only inheritances that you acquire or become entitled to within 180 days of filing, are property of the estate. It also includes things left to you in a divorce decree. So it's basically insurance proceeds (death benefits), inheritances by bequeath or demise, and property received as part of a dissolution of marriage. That's what's included in the Estate. That usually won't get your case dismissed, but the Trustee certainly will want to "administer" it to the extent it is not exempt by Federal or State statute.

As for the totality of circumstances, this is different. If you win the lottery the day after filing, before the 341 Meeting or even after the 341 Meeting, but before discharge, tyhe UST can dismiss under the totality of circumstances. While the money absolutely is not part of the Estate and the Panel Trustee can't touch it... the UST can move for dismissal because your "financial" condition changed.

This is a very important distinction that most people -- and some attorneys -- miss. Inheritances, insurance proceeds, and property received in a divorce are property of the estate at the point you receive or become entitled to receive them within 180 days of filing 9regardless of when you actually get control of the property. This money can be used to pay unsecured creditors.

If it's a lottery winning or other windfall, it is not the property of the estate the and panel trustee can't take it and give it to the creditors. However, the UST can move to dismiss your case because your financial circumstances changed. I don't even think a good percentage of attorneys understand the subtle difference.

While I'm one who says, "you can win the lottery after filing", I usually don't go on to explain that your case still may be dismissed. I think the fact of the matter is that the odds of winning the lottery right after filing bankruptcy, are probably worse than actually winning the lottery to begin with!

[DeadManCrawling]

JB notes a subtle and important distinction.

The effect of the subtlety is that the trustee cannot simply take new income or lottery winnings and hand out the dollars to creditors. They can move for dismissal. I would find that preferable, because you could then negotiate lower settlements with the creditors, rather than having them made 100% whole by the trustee.

In the inheritance and divorce decree event, it would be different, and those monies are ALREADY considered in the trustee's control, even though they may not have been received, or even coming (if the person is still alive, but passes away prior to 180 days).

I would be more than happy to negotiate settlements from my Powerball proceeds of, say, 149 million dollars. I could make a few phone calls or even employ an attorney. It wouldn't take much time away from my endless Pina Colada festival in Barbados at all.

[Moneypenny]

what if someone got a new job after discharge or a spouse got a job who didnt have one before the discharge? could that get a case dismissed? and if so, how long after the discharge does this ability to dismiss the case exist?

also, i might have missed it but what is the actual review process post-discharge, random audits or what?

[justbroke]

what if someone got a new job after discharge or a spouse got a job who didnt have one before the discharge? could that get a case dismissed? and if so, how long after the discharge does this ability to dismiss the case exist?

In the grand scheme of things... no one cares if you get a new job or a higher salary after the 341 Meeting -- for a Chapter 7 case.

also, i might have missed it but what is the actual review process post-discharge, random audits or what?

None! The only way this could possibly be brought up is for fraud and that someone complains. This program is not about post-discharge/post-close auditing. Some people do manipulate the system and get away with it. Some people are turned in by friends and family that don't understand how they buried thousands in cash and hid assets, and received a discharge.

[Moneypenny]

oh i see. that all makes sense.

what if you dont know if you got a raise before filing, but know before 341, but you are still below median looking forward (if it even makes sense to speak of the median looking forward).

[justbroke]

what if you dont know if you got a raise before filing, but know before 341, but you are still below median looking forward (if it even makes sense to speak of the median looking forward).

Some Trustees just don't care if you get a raise or get a job before the 341 Meeting. Most Trustee's ask you if your job or financial picture changed between filing and the 341 Meeting.

Even if you said you got a new job or a raise, most Trustee's do not care. On some rare occasions, I have read cases where a person had no job before filing, then suddenly had a $100K+ job a week after filing. Now that perturbs the Trustee.

[blessed]

We're in that boat Moneypenny. I'm pretty sure we'll get a raise before the 341 and I might even change jobs. But I'm prepared to show childcare and clothing expenses that were not originally included in our budget to offset the increase of DMI if necessary.

[Moneypenny]

I am going back and forth, really fretting over this. Justbroke seems to have the same view as the attorney (provided that the attorney wasn't just checked out or worse during the meeting).

my swing specifically is from 5700 to 6550 in gross, or a possible 850 swing. How could I possibly have 850 in expenses and receipts if I didn't have that kind of money before the raise. Isn't that logical? The trustee must think that through, no? Or they still dont care?

I dont feel I have iron clad expenses to back it up: a high food bill 950 for 4 (that's well documented though), brand new life insurance policies costing $200 total, exercise memberships of 159, violin lessons of 180, etc. I feel really worried about these, as you no doubt have noticed.

Thing is, i still have the option right now to not go up for this raise. But then I am dead broke for whole year. I go back and forth.

Well, at least I have the whole darn thing boiled down to one issue. That's clarity in a way?

Any thoughts?

MMP

[justbroke]

I am going back and forth, really fretting over this. Justbroke seems to have the same view as the attorney (provided that the attorney wasn't just checked out or worse during the meeting).

Are you saying that I'm checked out, or worse? LOL No, what I wrote is the reality.

have that kind of money before the raise. Isn't that logical? The trustee must think that through, no? Or they still dont care?

For a Chapter 7, many of them just don't care, unless it's significant. Don't ask me what significant is, because it's subjective.

[fltoo]

Want to clarify for readers of this thread, that the above posts refer to after "filing". The OP asked about after "discharge."

Only the 3 things Just Broke cited are property of the estate within 180 days of "discharge."

Anything else is yours to keep, including lottery winnings and higher income.

[gotquestions]

I thought one of you might know

I got my thumb cut off and kinda reattached a week or two prior to filing. Do i have to pay back money I am winning in a law suit after ch 7 bankrupcy because it's due to an insurance claim that happened prior to filing. I got an attorney to go after the insurance company after filing for bankrupcy and we actualy enterd litigation in court against the insurance company after we were discharged. I thought I heard something about paying back if I won the lotery or a settlement but I'm not sure if it matters since my bankrupcy was discharged over a year ago, I believe it was in Feb. 2009. Does anybody know anything about that stuff? The trustee did ask a couple times durring my meeting if I was going to be compensated and at the time I didn't think I was so I told him that the insurance company said they werent liable, at that time. We figure I'll be getting a check of about 100k-300k after I pay my attorney fees and I still may not get paid for another 6 months or a year.

[justbroke]

I got my thumb cut off and kinda reattached a week or two prior to filing. Do i have to pay back money I am winning in a law suit after ch 7 bankrupcy because it's due to an insurance claim that happened prior to filing.

This depends on your State's bankruptcy exemptions. Just about all States allow you to keep the money necessary to pay medical bills and certain other expenses. However, many States protect some but not all of the settlement or award that arises from such a claim.

You have to include the insurance claim as an "asset" of your bankruptcy estate with a value of "unknown" or $1. Then you exempt it to the extent that you can under your State's exemption laws.

Since you were injured prior to filing, you probably should have disclosed that in your bankruptcy filing! You should get in touch with your old bankruptcy attorney and find out what you should do.

The trustee did ask a couple times durring my meeting if I was going to be compensated and at the time I didn't think I was so I told him that the insurance company said they werent liable, at that time.

Exactly why the Trustee asked. They want some of the proceeds of any lawsuit. Again, you really need to speak with your bankruptcy attorney. The proceeds are technically property of the estate to the extent that they are not exempt.