Bankruptcy Bits: Important victory for debtors: Post-petition bonus found not to be part of estate

Important victory for debtors: Post-petition bonus found not to be part of estate

In a case of interest to many people filing for relief under Chapter 7 of the Bankruptcy Code, the Bankruptcy Appellate Panel for the 8^th Circuit reversed the prior decision of the bankruptcy judge and ruled that under Section 541 a debtor's receipt of a post-filing bonus was not property of the bankruptcy estate, and therefore the Chapter 7 trustee could not make a claim for those funds received by the debtor recipient.

In the case of In re Klein-Swanson, #12-6054 (BAP 8^th Cir 3-22-13,) the debtor's employer offered two annual bonuses to its employees, but the process was entirely discretionary each year, and no employee was guaranteed any bonus. Although in this case, the debtor had completed the work leading to the bonus decision before the Chapter 7 was filed, the BAP determined that there was no evidence that the employer made the decision to award the actual bonus until after she had filed her Chapter 7 petition. They reasoned that the employer's decision to award the bonus to the debtor was not made at the time the petition was filed, and that due to the highly discretionary nature of the decision, it was totally uncertain if she would be awarded any bonus. In this case, Minnesota law supported that conclusion, and the BAP overruled the bankruptcy court judge's decision, determining that the debtor got to keep her bonus.

Once again, this demonstrates that smart and skilled lawyers can achieve great legal results for their clients.

 

Michael B. Katz, Esq.

Photo credit: Microsoft 

http://bwlaw.blogs.com/bankruptcybits/2013/04/important-victory-for-debtors-post-petition-bonus-found-not-to-be-part-of-estate.html