Timeline:
1. I filed a class action lawsuit
2. I filed for Chapter 7 bankruptcy, noting the lawsuit on line 21 of Schedule B
3. I received my discharge
4. I amended Schedule B to reflect a proposed settlement including a $5,000 class representative incentive award and Schedule C to apply the last $3,500 of my wildcard exemption to it
5. The settlement was finalized
6. I received a check from the settlement administrator made out in my name for $5,000
I have been told previously that because I filed the class action lawsuit before I filed for Chapter 7 that the class representative incentive award becomes the property of the bankruptcy estate.
My questions:
1. What do I do with this check?
3. Will the tax return my bankruptcy trustee files on behalf of the estate reflect income of $1,500 or $5,000? (or some other amount after his fee is taken out)
4. If I have to send all $5,000 to my bankruptcy trustee, will the amount I receive back ever be less than $3,500? I.e. can my bankruptcy trustee take some of his fee and taxes out of the exempt portion? E.g. if he takes $1,250 as his fee and taxes are $1,000 leaving only $2,750 for me.
5. Do I have to pay income tax on the $3,500? I.e. is the $3,500 considered my income, the estate's income, or both? If I have to pay income tax on it, where do I report it?
6. Anything else I should know?
Thank you in advance for any assistance you can provide.
1. I filed a class action lawsuit
2. I filed for Chapter 7 bankruptcy, noting the lawsuit on line 21 of Schedule B
3. I received my discharge
4. I amended Schedule B to reflect a proposed settlement including a $5,000 class representative incentive award and Schedule C to apply the last $3,500 of my wildcard exemption to it
5. The settlement was finalized
6. I received a check from the settlement administrator made out in my name for $5,000
I have been told previously that because I filed the class action lawsuit before I filed for Chapter 7 that the class representative incentive award becomes the property of the bankruptcy estate.
My questions:
1. What do I do with this check?
A. Cash it and send the remaining $1,500 to my bankruptcy trustee
B. Cash it and send all $5,000 to my bankruptcy trustee
C. Send it as is to my bankruptcy trustee (can my bankruptcy trustee cash a check made out in my name?)
D. Sign it over to my bankruptcy trustee
E. Something else?
2. Does my bankruptcy trustee receive, as his fee, 25% of the $5,000 or 25% of the $1,500?B. Cash it and send all $5,000 to my bankruptcy trustee
C. Send it as is to my bankruptcy trustee (can my bankruptcy trustee cash a check made out in my name?)
D. Sign it over to my bankruptcy trustee
E. Something else?
3. Will the tax return my bankruptcy trustee files on behalf of the estate reflect income of $1,500 or $5,000? (or some other amount after his fee is taken out)
4. If I have to send all $5,000 to my bankruptcy trustee, will the amount I receive back ever be less than $3,500? I.e. can my bankruptcy trustee take some of his fee and taxes out of the exempt portion? E.g. if he takes $1,250 as his fee and taxes are $1,000 leaving only $2,750 for me.
5. Do I have to pay income tax on the $3,500? I.e. is the $3,500 considered my income, the estate's income, or both? If I have to pay income tax on it, where do I report it?
6. Anything else I should know?
Thank you in advance for any assistance you can provide.