Bonuses and Means Test Income
By L. Jed Berliner, Massachusetts Bankruptcy Attorney on Dec 3, 2008 in Bankruptcy Cases & Legislation, Bankruptcy Practice and Procedure, Massachusetts, Means Testing
Year-end bonuses may be prorated over the covered 12 months, instead of being counted 100% as income when received, according to a recent case interpreting Means Test Income.
I recently posted on this In re Bernard case from Judge Joel B. Rosenthal of the U.S. Bankruptcy Court for the District of Massachusetts, which ruled that a paycheck, received after the six month lookback for Means Test income purposes, should actually be included because it was derived from that six month period. The Court held that the actual date of receipt was not relevant, despite the wording of the Bankruptcy Code.
The same logic would prorate a year end bonus for each month it covered, so that only part of the bonus would be included in the Means Test’s six month period because only part of the bonus would have been derived from the six months.
Many lawyers have been recommending thata filing be delayed until the impact of a bonus is diluted over the next few months. This advice is now open to review, although there is no guarantee that the ruling will be followed elsewhere or that the interpretation on a late-received paycheck would be consistently applied to a year end bonus.
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