Debtor’s Anticipated Bonus from Employer that had Discretion on Whether to Award it was Not Property of the Bankruptcy Estate

Debtor’s Anticipated Bonus from Employer that had Discretion on Whether to Award it was Not Property of the Bankruptcy Estate

Joint Debtors filed a Chapter 7 bankruptcy in November 2016. Their original Schedule A/B included the wife’s anticipated bonus of $9,500 as well as a detailed description of the bonus. The Debtors exempted the anticipated bonus of $9,470.64 pursuant to a state statute.

On January 30, 2017, the Debtors filed an amended ScheduleA/B listing the value of the anticipated bonus as unknown. The amended Schedule A/B describes the anticipated
bonus as “Potential Bonus From  Debtor’s Employer–NOT PART OF BANKRUPTCY ESTATE Per KLEIN-SWANSON, 488 BR 628 (B.A.P. 8th Cir., 2013), disclosure  made to avoid costly litigation which would hinder debtors’ fresh start. See attachment.” In the attachment to their amended Schedule A/B, the Debtors argue that the anticipated bonus is not an asset of the wife Debtor’s estate and repeatedly refer to the ,bonus as “entirely discretionary.”
The Debtors also filed a Response to Trustee’s Objection to Exemptions (“Response”) on January 30. The Response elaborates on the Debtors’ argument about the status of the anticipated bonus, clarifies that the Debtors will seek to exempt the anticipated bonus pursuant to

state statute if it is deemed property of the estate, and includes a copy of the 2016 General Plan Provisions (“GPP”) governing the  Debtor’s employer’s bonus program as an attachment. According to the GPP,the employer uses the bonus program to “pay for performance—company, line of business and individual performance.” The GPP gives the employer “full and final discretionary authority to interpret and administer the Plan as well as determine the amount, if any, and payment of all incentive bonuses, awards and other compensation pursuant to the Plan.”

The Trustee’s Brief argues that the GPP does not require the  Debtor to be
employed when her employer issues a bonus, that her job performance
does not have to be satisfactory for her to be eligible for a bonus, that the GPP is ambiguous about whether the employer has the discretion to not issue a bonus, and that “the only contingency that must be fulfilled in order for female Debtor to receive the Bonus is her employers’ [sic] decision to pay it.”  According to the Trustee, the court should apportion the anticipated bonus based on the amounts earned pre-and post-petition with the pre-petition portion treated as property of the female Debtor’s estate.

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