Brenner Spiller & Archer

My Bonus Check and Filing For Bankruptcy

Getting a bonus check from your employer for all of your hard work? That’s great! But what happens to your bonus if you file for bankruptcy? It depends on a few things:

  • When you get the bonus
  • If you normally get this bonus every year
  • The type of bankruptcy you file for
  • Where you file

A Bonus Before Bankruptcy

If you file for Chapter 7 bankruptcy (when you don’t repay most of the companies you owe) and you get your bonus check within six months before you file, you might not get to keep it. The trustee in your case averages all of your income within six months before filing, which can include bonus checks.

If the check is large enough, you may not even be allowed to file for Chapter 7 at all and instead need to file for Chapter 13 bankruptcy.

When you file for Chapter 13 (in which you slowly repay the companies you owe), the same rules apply. If you’ve received a bonus within six months before filing, you are required to tell your lawyer and trustee. However, if you normally get this bonus every year, it will most likely be factored into your repayment plan. But if this is a surprise, one-time bonus, there’s a chance it won’t be factored in. It depends on your bankruptcy plan.

A Bonus After Bankruptcy

The trustee also looks at what income you will receive within one year after filing (in a Chapter 7 bankruptcy), including some bonuses. Depending on the other funds and property that you own, your bonus may be added in.

The good news is a future bonus won’t determine if you can file for bankruptcy or not—that’s already determined by income before filing.

If you file for Chapter 13 and receive the bonus after filing, it may be factored into your repayment plan. This depends on if the bonus is something you normally get every year or if it’s a one-time bonus.

In fact, any raise at work, overtime payments or extra income may be used to repay creditors more quickly.

Where You File

State laws differ, so check with your lawyer to see if a specific state law will determine where or not you can keep a bonus check.

What You Can Do

  1. If you receive a bonus and want to keep it, wait to file for bankruptcy until six months after receiving it. There’s still a chance it can affect the outcome of your bankruptcy case, but if you’re able to wait six months and one day, do it.
  2. Ask a lawyer. We’re here to help you with questions like these. Remember, we work for you, so we’re trying to get you the best result possible.

What You Shouldn’t Do

Don’t hide it. If you receive a bonus, the trustee and your lawyers will know based on their access to your income status. This is a stressful situation, but being honest with your lawyer will help you more than being deceiving.

This is all a part of your bankruptcy plan, which your lawyer will help you with. Your plan may tell you to give any extra income—like bonuses—to the trustee, or you may be able to keep it.

This article should not be taken as legal advice. If you’re considering bankruptcy or any other legal debt relief option, you need to consult an attorney for guidance. If you’re in New Jersey and seeking legal assistance, we can help you.

Brenner Spiller & Archer is a New Jersey law firm that is dedicated to helping families find relief from the burden of debt and other financial woes. For more than 35 years, our bankruptcy lawyers have provided effective guidance on all debt relief matters to clients throughout Central and South Jersey.

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