Here is a concept that is sometimes difficult for an Arizona bankruptcy lawyer to explain to a potential client. Any property the debtor acquires after the bankruptcy filing date is not property of the bankruptcy estate and is the debtor’s sole property. Therefore, an Arizona bankruptcy lawyer will advise that a debtor may keep all wages, commissions and account receivables for work the debtor performs after the bankruptcy filing date.
What about unpaid wages, commissions or account receivables owed to the debtor for work performed prior to filing bankruptcy? Any property a debtor owns or is owed as of the bankruptcy filing date, including unpaid wages, commissions or accounts receivables, is property of the bankruptcy estate and controlled by the bankruptcy trustee. In Arizona, 75% of a debtor’s unpaid wages, commissions and account receivables are exempt and protected. Therefore, a debtor may be required to pay 25% of such amount to the bankruptcy trustee. Most debtors are owed some wages when they file bankruptcy. When an employee gets paid, it is usually based on work performed prior to payday.
For example, if a debtor has worked five days before filing bankruptcy and is owed $1,000 in net wages for those five days but will be paid after he files bankruptcy, the bankruptcy trustee may require the debtor to pay 25% of such amount ($250). If a debtor is a real estate agent and has signed a real estate agreement entitling the debtor to a $5,000 commission when the home closes in the future, the debtor may be required to pay to the trustee 25% of such amount if the debtor files the bankruptcy before the closing occurs and before the debtor has received the commission (if the closing does not occur, the debtor will not be required to pay anything to the trustee). As a side note, an experienced Arizona bankruptcy lawyer may try to argue that the debtor should be able to keep more than 75% of the commission if some or all of that commission was earned due to work performed after the bankruptcy filing date.