This video helps you understand how a bonus works in Chapter 13. The Layton Law Firm PLLC routinely represents bankruptcy clients who receive annual bonuses or commissions. We have been able to successfully assist clients in keeping those bonuses and commissions in Chapter 13. If you are considering filing bankruptcy, we are here to help.
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 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 that 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 that you have not yet earned, there is good case law that 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 that 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.