Filing Date, Means Test, and Severance Check

[tdawg]

I am being laid off the end of this month and will be filing Ch. 7. I am going to be receiving a pretty substantial severance check/bonus for staying this long - I was notified almost 2 months ago of the layoff. I've talked this over with my lawyer for the last week, and I think what he came up with is a good idea, but I wanted to run it by this forum:

He said if I filed before I received the check that I would only be allowed to exempt against the gross amount, so I would need to give the trustee almost 1/3 of it. However, if I receive it (I'd receive 1/3 less because of taxes), then I would be able to keep all of it, and if we file the same month that I receive it, then it would NOT count in my means test because that is for all income received the last six months (not including the month of filing). For example, I receive the check November 5, we file November 10, for the means test, I include May 1 - Oct. 31 income.

I totally understand what he's saying, but if this is included in the 6 month lookback means test, then I would fail it. I guess I just really want to confirm this so I can try to get sleep or if there is a problem, find it out sooner rather than later. What do ya'll think?

[OhioFiler]

If you're losing your job why are you in a hurry to file? Do you have another position lined up?

[StartingOver08]

Your attorney is right. If you receive the severance in Nov and file in Nov then the severance is not included in your lookback period. The lookback period is the 6 FULL MONTHS prior to the filing date. Make sure the attorney actually files on your planned filing date...you are taking a chance if your attorney is slow to file.

[tdawg]

If you're losing your job why are you in a hurry to file? Do you have another position lined up?

Nope, unfortunately I don't have a job lined up. If I waited until the following month (December), then I would have to include the severance in my means test, and I would fail it. I would fail the test for months afterwards, which would mean that I wouldn't be able to file for 4 months of so afterwards, which would not be good. This is in addition to the standard reasons below:

Stop creditor calls, limit the number of accounts that go to collection, would prefer not to have judgements filed against me, etc.

[OhioFiler]

Nope, unfortunately I don't have a job lined up. If I waited until the following month (December), then I would have to include the severance in my means test, and I would fail it. I would fail the test for months afterwards, which would mean that I wouldn't be able to file for 4 months of so afterwards, which would not be good. This is in addition to the standard reasons below:

Stop creditor calls, limit the number of accounts that go to collection, would prefer not to have judgements filed against me, etc.

I would not recommend filing bankruptcy without knowing how you will support yourself afterward. I'd wait the 4 months at least.

[tdawg]

Your attorney is right. If you receive the severance in Nov and file in Nov then the severance is not included in your lookback period. The lookback period is the 6 FULL MONTHS prior to the filing date. Make sure the attorney actually files on your planned filing date...you are taking a chance if your attorney is slow to file.

I'm pretty confident he can file right away. He said he can file electronically any day at any time. He already had all of my paperwork done for filing this month and last week's meeting was to go over it and for me to sign papers. So, I'm pretty confident that he won't have a problem filing in the same month. However, I will feel much better after I see a filing number and have my 341 date. :-)

[AngelinaCatHub]

It sounds right to me. Now in the event that the Trustee at your 341 asks if you received some sort of monies after you submitted your papers, you have to tell him. However, since it is a severance check and that you just lost your income, I would be tempted to pay up rent ahead and stockpile food and other exceptions as after all, you now are unemployed and that changed your filing of papers the same day you got the check. Unless it is a real windfall, I would go with what your lawyer states. Not only are you paying your lawyer to worry for you, you are paying him for advice and also assuming blame if it is not accurate. A lawyer cannot commit a fraud on your behalf. Judges do not go lightly about such things. He can be sanctioned.

'Hub

[jribe]

the money wouldn't be included in your six month look back if you file the same month.. It will need to be included on your schedule I (current income)., and i assume you'll be getting unemployment? I think you would need to note that at the bottom of schedule I, where it asks about any changes upcoming..

What i don't understand is why your attorney thinks if you file first, you can't exempt the entire amount?

If you have enough exemptions to cover it- it's covered.. Why would he get 1/3?

I am being laid off the end of this month and will be filing Ch. 7. I am going to be receiving a pretty substantial severance check/bonus for staying this long - I was notified almost 2 months ago of the layoff. I've talked this over with my lawyer for the last week, and I think what he came up with is a good idea, but I wanted to run it by this forum:

He said if I filed before I received the check that I would only be allowed to exempt against the gross amount, so I would need to give the trustee almost 1/3 of it. However, if I receive it (I'd receive 1/3 less because of taxes), then I would be able to keep all of it, and if we file the same month that I receive it, then it would NOT count in my means test because that is for all income received the last six months (not including the month of filing). For example, I receive the check November 5, we file November 10, for the means test, I include May 1 - Oct. 31 income.

I totally understand what he's saying, but if this is included in the 6 month lookback means test, then I would fail it. I guess I just really want to confirm this so I can try to get sleep or if there is a problem, find it out sooner rather than later. What do ya'll think?

[tdawg]

I would not recommend filing bankruptcy without knowing how you will support yourself afterward. I'd wait the 4 months at least.

I'm confused. What would the advantage to waiting to file be? I'm not planning on taking on any debt any time soon. So, how would waiting 4 months help me?

[OhioFiler]

I'm confused. What would the advantage to waiting to file be? I'm not planning on taking on any debt any time soon. So, how would waiting 4 months help me?

Unless you can predict the future you could acquire debt. Medical emergency, lawsuit, car accident... You just don't know. What you do know is after you file BK you can not file again for many years. Waiting until you know how you are going to be able to pay your bills going forward is a good strategy.

[tdawg]

the money wouldn't be included in your six month look back if you file the same month.. It will need to be included on your schedule I (current income)., and i assume you'll be getting unemployment? I think you would need to note that at the bottom of schedule I, where it asks about any changes upcoming..

What i don't understand is why your attorney thinks if you file first, you can't exempt the entire amount?

If you have enough exemptions to cover it- it's covered.. Why would he get 1/3?

He said if I file first, then I would be exempting against the gross amount. For example, let's say the severance was $10,000, and I had $7,000 in exemptions available. If I file first, then the trustee would say you're getting $10,000, you can exempt $7,000, so give me a check for $3,000. However, if I receive the check first, and $6,500 is direct deposited into my checking account, then I can exempt the whole $6,500, plus I can spend some of it down on mortgage, food, etc. before filing.

[tdawg]

Unless you can predict the future you could acquire debt. Medical emergency, lawsuit, car accident... You just don't know. What you do know is after you file BK you can not file again for many years. Waiting until you know how you are going to be able to pay your bills going forward is a good strategy.

I understand what you're saying. I do have car insurance and my employer is paying my cobra premiums for a few months, so I feel a little safer in regards to those. Using your strategy though, wouldn't you always put off a bk filing indefinitely because you don't know what's going to happen a few months down the road?

[AngelinaCatHub]

If you wait that long, then you would have to update your papers and include the severance. However, UC is not very lucrative. If you are confident that you can live on what you aren't making now or can easily get employed, I would go for it. 'Hub

[tdawg]

It sounds right to me. Now in the event that the Trustee at your 341 asks if you received some sort of monies after you submitted your papers, you have to tell him. However, since it is a severance check and that you just lost your income, I would be tempted to pay up rent ahead and stockpile food and other exceptions as after all, you now are unemployed and that changed your filing of papers the same day you got the check. Unless it is a real windfall, I would go with what your lawyer states. Not only are you paying your lawyer to worry for you, you are paying him for advice and also assuming blame if it is not accurate. A lawyer cannot commit a fraud on your behalf. Judges do not go lightly about such things. He can be sanctioned.

'Hub

He wants me to file AFTER I receive it, so it will show up in my checking account, and the Trustee will see at my 341 that I received it when I provide him with all of my pay statements, so I don't think we're trying to hide anything. I just want to make sure it does NOT show up on my means test. I'm paranoid about someone saying, "Since you were laid off Oct. 31, then even though you received the check, you earned it in October" or something like that. But from everything I've read, for the means test, income is considered based on when it is received. Please correct me if I'm wrong since I'll be finalizing this decision with my lawyer in the next couple days.

[AngelinaCatHub]

He wants me to file AFTER I receive it, so it will show up in my checking account, and the Trustee will see at my 341 that I received it when I provide him with all of my pay statements, so I don't think we're trying to hide anything. I just want to make sure it does NOT show up on my means test. I'm paranoid about someone saying, "Since you were laid off Oct. 31, then even though you received the check, you earned it in October" or something like that. But from everything I've read, for the means test, income is considered based on when it is received. Please correct me if I'm wrong since I'll be finalizing this decision with my lawyer in the next couple days.

That is the best advice I could give you. He is a bk attorney (I assume) so he's seen your kind of case before. 'Hub