Sales Commissions In Bankruptcy

Many of my bankruptcy clients are in sales and are paid on commission.  When you file bankruptcy it is important to understand how the bankruptcy code treats commission payments and how you can protect your commissions.  The important thing to understand is that if you work with a good Seattle bankruptcy attorney you can protect your future commissions.  You should not let the fear of losing your future commissions prevent you from filing bankruptcy.
The biggest area of misunderstanding and concern is how commissions are characterized.  You probably think of them as a paycheck, which makes total sense.  However, the Bankruptcy Code treats them as an asset.  They are an asset because they are an interest in property that you are entitled to receive in the future.  The good news is that assets can be protected.
The first thing you have to understand is when a commission becomes an asset.  As you know, the sales pipeline is full of customers and potential customers.  Just because you have someone in your sales pipeline doesn’t mean that you will get a commission from them or that the commission will be part of the bankruptcy estate.  The commission only becomes an asset when you are legally entitled to receive that commission.
Your legal entitlement to the commission is determined by state law.  Typically, it arises when the sales contract is signed.  In some industries, your legal entitled to a commission only arises when a deal closes.  As you know, contract signing and deal closing can sometimes be separated by days, weeks, or even months.  During that time a deal can fall through.  I am familiar with commission structures and the law governing commissions in real estate, insurance, lending, vehicle sales, outside sales, and inside sales.  Additionally, I will work with you to understand your commission structure.  The purpose of knowing the law relating to commission income and understanding commission structure is to set up a bankruptcy petition that protects your future commissions.
Once I have analyzed your commission structure, we can setup a bankruptcy filing plan that protects those commissions.  The first step is to look at all of your assets and determine how much future commissions can be protected.  The second step is to time the bankruptcy petition so that you minimize the future commissions that are actually assets.  I work very closely with my clients to determine when to file the case.
The other thing to keep in mind is that your exemptions come first.  This is important, because you may not be able to collect all of the commissions that you list on your bankruptcy petition.  For example, a sale may not close.  The fact that a sale doesn’t close does not reduce your exemption, it reduces the amount available to the trustee.
The bottom line is that sales commissions and sales income can be protected in bankruptcy.  If you are concerned about your financial situation contact David Fuller – an experienced Seattle bankruptcy attorney – about how bankruptcy can give you a fresh start and who can protect your future commissions.
The post Sales Commissions In Bankruptcy appeared first on Bankruptcy Attorney Seattle and Kent.