Pension/Inheritance (Long)

[originalhealer]

I am still doing research on the whole pension/inheritance issue. I haven't called but one lawyer and that was after hours because I work all day. But, correct me if I'm wrong, but there are several reasons why I think it may be a little difficult for the Trustee to take that money:

1. At the time of filing, the pension was my ONLY source of income. According to my state's exemptions (I cannot use Federal Bankruptcy Exemptions), it states the following as exempt:

"support or separate maintenance to the extent reasonably necessary for the support of the debtor and his dependants".
"pension payments"
"undistributed interest in retirement plans or pension plan"

2. I can also apply the Federal Non-Bankruptcy Exemptions:

"war risk, hazard, death, or injury compensation" - Obviously this cannot be an exemption for the person that died, so it has to be for the beneficiary, right?

Then it has categories for retirement and survivor's benefits.

Finally, it lists the following:
"Minimum 75% of disposable weekly earnings or 30 times the federal minimum hourly wage, whichever is more; bankruptcy judge may authorize more for low-income debtors"

3. Finally, it was my understanding that when filing a Chapter 7, anything you earned or possessed up to the day of filing is what is up for grabs, but whatever you earn or obtain after the date of filing is yours. I cannot access those funds even if I begged them. I can only get it one month at a time. Being that I live on this money, isn't it income, even if I didn't actually work for it??? I pay federal taxes on it every year!

I am weighing this heavily because even though there are some benefits to filing a Ch 13, from my reading I discovered that in a Ch 13, I have to pay on my debts at least as much as the value of my non-exempt property.

Assuming the pension is non-exempt, then, wouldn't you know, my dischargeable debts equal just about exactly, the amount of money in the pension. And that is if ALL of my creditors file a Proof of Claim. But in a Ch 13, you only have to pay the creditors that file, right? So, my actual payoff at 100% (excluding my student loans, which I will probably leave out) will end up being LESS than the money still available in the pension! If that's the case, then I can design my own repayment plan! Or, if I have to pay 100% of all my dischargeable debts anyway, I may as well file a Ch 7! Because, either way, they are getting almost the entire pension anyway! So I may as well make it quick instead of letting them drag it out for three long years.

Unless I get lucky and somehow the Trustee can't take the pension in a Ch 7 after all.

I'm telling you, after all this research, I should go to law school!

[HHM]

I am sorry, but we don't really track your story from post to post, what money is at issue here again?

Pensions are usually only exempt to the direct beneficiary, i.e. the person who earned the Pension, so I have a feeling you will lose on that ground.

Support or seperate maintance is generally legal jargon for "alimony" in regards to a divorce.

undistributed interest in retirement plans or pension plan, again, it usually only applies to the direct beneficiary, the person who earned the benefit.

war risk, hazard, death, or injury compensation, come on, you have got to be kidding right, using this for inheritence, please...

Weekly earnings is earnings FROM EMPLOYMENT...

I could be wrong as each state has slightly different rules regarding exemptions, but I think you are fighting an uphill battle on this one, I really hope it works out for you.

[originalhealer]

Well, we'll see, because the court has to allow you something, and at the time of filing all I had was the pension to live on.

[originalhealer]

Not only that, but the NOLO book is where I got the income allowed to be from various sources. They allow you to keep so many other things...unemployment, disability benefits, child support, etc. etc. Why not a pension?

[HHM]

Not only that, but the NOLO book is where I got the income allowed to be from various sources. They allow you to keep so many other things...unemployment, disability benefits, child support, etc. etc. Why not a pension?

Actually, the court doesn't need to allow you anything, you are allowed only that which can be exempted. The problem with the pension is that its "not your pension".

Understand, I am presenting you the worst case scenario so you can be ready. I really don't "know" how it will turn out. I am not trying to be preachy, but remember what bankruptcy is, you are asking to be relieved of all your debt. Back in the day, there used to debtor's prison, quasi indentured servitude, and total bankruptcy. Total bankruptcy is literally turning over everything you have at the time you file BK, you are left with nothing. Over the years, society has mellowed a bit and now provides "exemptions". Exemptions soften the hardship of bankruptcy by allowing you to keep certain items so you can maintain some level of existence so that you do not become a burden on the state. But the exemptions are all you get.

I sympathize with your position, really, but I also believe your about to get a cold hard slap of reality when it comes to this pension. But you may have something going for you, the trustee does not want to recieve payments for the next 4-6 years (I forget how long you said was left on the pension), he wants the present day cash value, if there is no way to cash it out, or if he can't sell it for a reasonable amount to a firm that buys the rights to these types of annuities, he may do nothing.

[originalhealer]

I see your point. We'll see. Maybe he will only be able to get a part of it. I have given it a lot of thought, and even the worse case scenario, if he takes all of it, the entire amount is about nearly equal to my dischargeable debt. My student loans are non-dischargeable, but they are also not past due, and in fact are not even in repayment yet because I am in school. So, unless I amend my petition to exclude the student loans, I am thinking that if he applies the rest to all of my other debt, I will have in fact paid every last dime of that money. So, after bankruptcy, I will only have the student loans left to pay. And I will have paid all of my debt, instead of all of my debt having been charged off. So, I guess I could have done without the bankruptcy.