If you have a job where part (or all) of your income is based on commissions, and are considering bankruptcy, you need to tread carefully.  Your commission might be at risk of seizure by a bankruptcy trustee.  The reason for this hinges on whether you are considered an employee or an independent contractor.

The Difference Between Salary and Commission

Do you get a paycheck with tax deductions and a W-2 at the end of the year, or do you get commission checks and a 1099?  If it is the latter, when you file bankruptcy can be very important, and delaying it can cost you money.

This is because moneys due and payable to an independent contractor can be considered a receivable to a business, not a paycheck, and as such an asset.

How to Know If Your Money is At Risk

The kicker becomes whether or not that commission has been fully earned prior to your filing the bankruptcy.  Ask yourself the following questions:

  • Is there anything I still need to do to earn that commission?
  • Is there anything that anyone else has to do before it is payable?
  • Am I just waiting on a check to be cut?

Salary earned before or after the filing of a chapter 7 bankruptcy is not touchable by a trustee.  However, a business receivable is reachable as an asset to the extent that you cannot exempt it. Timing is everything, and procrastinating the filing of a bankruptcy could cost you money!

So What Do I Do?

If you live in southern New Jersey and are considering filing bankruptcy, please feel free to call me at 856-432-4113 or contact me through this site for a free consultation in my Woodbury office to discuss your case.

If you are looking for more information about bankruptcy, then download my free book,Top Questions People Ask About Filing Bankruptcy in New Jersey.

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Steven J. Richardson
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Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.