Some employers give their employees yearly bonuses and holiday bonuses. If you are thinking of filing a Chapter 7 bankruptcy, there are a few things you should know if you have just received a bonus, or if you are expecting a bonus within the next year.
As a general rule, if you have received a bonus within the last six full months, the bonus may be included in calculating your income to determine whether you qualify for a Chapter 7 bankruptcy. When you file a Chapter 7 bankruptcy, the United States Trustee will average your last six full months of income to decide whether you qualify for a Chapter 7. For example, if you file for a Chapter 7 bankruptcy in July, the trustee will look at your average income from January to June. If you have received a bonus within these six months, the Trustee will include the bonus in your average income. If the bonus is a large bonus, it may affect whether you qualify.
One possible solution is to wait until your bonus falls off of the six month average before filing for bankruptcy. Suppose that you received a bonus on January 1. If you file for bankruptcy in July, this bonus will likely be included in your six-month average to determine whether you qualify (January to June). But if you wait to file until August, your January income will no longer be included to determine whether you qualify for bankruptcy, so you may have an easier time qualifying.
You should keep in mind that the Trustee can also look at any bonuses are you entitled to receive within the next year after you file for bankruptcy. Future bonuses do not factor into whether you qualify for bankruptcy, but a future bonus may be considered an asset in your case. The reason for this is that even if you have not yet received a bonus, if you are entitled to the bonus at the time you file your case, it is considered an asset in your bankruptcy. Depending upon the other assets that you own, you may be able to keep your bonus, or you may have to give up the bonus to the trustee when you do receive it. Whether you can keep your future bonus when you file for a Chapter 7 bankruptcy depends on the facts of your case. You should consult your attorney if you are expecting to receive a bonus within the next year, to determine whether you can keep your bonus.