Bonus Checks During Chapter 13 Bankruptcy

July 1, 2013

Bonus checks are something most employees look forward to receiving. For a debtor in a Chapter 13 bankruptcy, a bonus check can be a source of anxiety and frustration. Whether the debtor can keep the bonus check depends on several factors. Let’s take a look at what happens when a debtor receives a bonus check during a Chapter 13 bankruptcy case.

The first question to address is whether your bonus check is a one time event, or a regular occurrence. If your bonus check is regular and consistent, it should have been factored in to your pre-confirmation income figures. As such, it is already accounted for by the bankruptcy court by either increased monthly plan payments, or turnover to the trustee when your receive it.

If your bonus is not regular and consistent, and therefore not already provided for in your bankruptcy plan, then you must refer to your bankruptcy plan when you receive your bonus. Your Chapter 13 plan is a court order binding and directing you and your creditors during your bankruptcy case. Once your plan is confirmed, it is controlling. Your plan may direct you to turn over any extra income to the trustee for distribution to creditors, unless your plan already provides a 100% payout to creditors.

Your plan may be silent as to irregular bonuses. In that case, the bankruptcy trustee will likely discover the bonus income through your yearly tax return, and could request an upward modification of your plan payments to include the bonus income. The adjustment is not automatic and requires the order of the bankruptcy court. Any increase in income, including a part time job, regular overtime, or raise at work, may form the basis for an increase in your plan payment.

If you receive regular bonuses or commissions at work, discuss your income situation with an experienced bankruptcy attorney. Your attorney can advise you as to your obligations to your bankruptcy case and whether you will be able to keep your bonus during your Chapter 13 bankruptcy case.
 

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