What is considered Income?

[cometkitty]

We are getting ready to meet with our attorney next Thursday to complete all of the paperwork. Everything is really standard in our case and we are slightly over the income level but we don't pass the means test by $900/month due to day care costs. So we should be ok to file a Chapter 7.

Well low and behold someone that we did business with in Germany 3 YEARS AGO decided to send us a wire for $4000 for money he owed us. How would this be handled? It is not really "income" in the sense that it will be ongoing. We had tried collecting on this for about 2 years and then gave up. His financial issues were worse than ours so we just assumed that the money would never come in. I have the paperwork showing that this money was owed from selling a motorcycle to him in Sept 2010.

Is the lookback period include the month you are filing in? For example we will file in November so would the look back period be May through October?

Also - we are going to use this money to pay the attorney. Can we also pay our property taxes prior to filing with this money? That would use it all up

[dischargedbk]

Did the $4k hit your back accounts? Then by the request of the Trustee, he/she will see that money in the account as you will be required to provide bank statements. For the Southern District of Florida, I had to provide the last 3 months of bank statements and 6 months of pay stubs. Your trustee's criteria may vary.

You need to disclose this income, don't hide it.... not a good idea! Can you say Fraud... US Trustee will not take that lightly if found out. Best to disclose EVERYTHING to your attorney and let he/she deal with it and how to address for your filing. Not worth having your case dismissed over it and facing possible fraud charges.

NOTE: Bank accounts include ANY account where you have access to monies. In my case, I had a PayPal account that I had to turn over statements to the Trustee (even thought there was no $$ in that account). Again, they will want to see details for every account where you have kept monies, had access to those funds and the statement info for each.

Good luck!

[cometkitty]

I am going to disclose it for sure I was just curious if something like that could bump us into a Chapter 13 or not. I don't think we can afford a Chapter 13 and it is not like we get random $4000 wires coming in all the time!

[dischargedbk]

I am going to disclose it for sure I was just curious if something like that could bump us into a Chapter 13 or not. I don't think we can afford a Chapter 13 and it is not like we get random $4000 wires coming in all the time!

Your attorney should know how to work this into the equation. I had a big bonus hit in March which boosted my income a bunch and I still pass the Means Test and qualified to file a Chapter 7. (My attorney wasn't thrilled with the bonus, but they were able to work out the numbers so I passed the Means with no presumption of abuse arising) The $4k may or may not make any difference on whether you pass or fail the Means Test, but it should definitely be disclosed. My attorney taught me to show EVERYTHING (assets / income / debts) as it makes for a very pleasant experience, which fortunately I had with my case. The 341 was a breeze and had no issues along the way to the date of my discharge and Final Decree (case closed).

[justbroke]

It is income for purposes of the means test. Trust me, many people get hit with one-time bonuses as well that may skew their actual income. Your attorney will know how to deal with this. Since this is reportable income (IRS taxable income), it should affect your taxes as well. So even if you divided it by 12 ($4,000/12 = $333.33) you would also need to account for taxes ($1,000/12 = $83.33). The net affect would be $250 in one-time income. I'm sure your attorney will work with you to show this income (if necessary **) and find a path forward.

Some of the things that you mentioned (paying attorney, taxes, etc) are ways just to spend-down the money, but not actually ways to avoid including it in the calculation of current monthly income. Just work with your attorney.

** if you file before the end of November, you would not need to include this in your six-month lookback.