Bonuses and Means Test Income

03 Dec Bonuses and Means Test Income

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 Bernardcase 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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L. Jed Berliner practices exclusively in consumer bankruptcy, foreclosure defense, and related consumer protection litigation such as credit card defenses and suing debt collectors. He established his Springfield, MA practice in 1988. Attorney Berliner is a regular and active contributor to the Bankruptcy Law Network, the Bankruptcy Roundtable, and the National Association of Consumer Bankruptcy Attorneys, three specialized consumer bankruptcy forums on the Internet, and is an informal mentor to regional practitioners. He is recognized by his peers as an expert in consumer bankruptcy issues. He thoroughly enjoys being rated "excellent" in his client surveys.

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