The Importance of Pay Stubs in Bankruptcy

When you hire a bankruptcy attorney (I would humbly recommend myself for your consideration) he or she will certainly ask to review your pay stubs, and will continue to do so throughout your case.

Why the obsession with pay stubs?

Exact income information is very important in bankruptcy for a number of reasons. First, pay stubs are used to complete your bankruptcy means test calculation. This is a 6 month look-back (from the month of filing) at all sources of income. The means test will often determine if you will be a Chapter 7 bankruptcy or a Chapter 13 bankruptcy repayment plan (higher income debtors are required to file a Chapter 13). These numbers cannot be estimated, hence the request for pay stubs.

Second, two months of pay stubs are required for a required filing known as "employee income records" or "pay advices". These allow the trustee assigned to your bankruptcy to review your recent income and verify it is consistent with your bankruptcy petition. 

Finally, pay stubs help your attorney to accurately report income in Schedule I of your bankruptcy petition. This is reviewed by the trustee along with the monthly expenses you report in Schedule J.

If you are in a Chapter 13 bankruptcy, it is not required that you keep and submit all pay stubs throughout the duration of the plan. However, it cannot hurt to keep them in case your attorney needs to file an amended plan. Keep your pay stubs in a Chapter 13 bankruptcy at least until you have attended the Meeting of Creditors.

If you are scheduled to consult with an attorney, make sure you gather up all pay stubs for you and your spouse, at least going back several pay periods. This will make it more likely the first consultation will provide useful advice and information. If you do not keep your pay stubs, consult your payroll or human resources department. If you are self-employed, you will need to bring an accurate accounting of your recent business income and expenses.

Pay stubs provide important proof of your income that is need to file and verify a bankruptcy petition. Make sure your bankruptcy attorney is provided with the updated pay stubs needed for your case.