Severence Package While in ch13

[pcn]

[justbroke]

How is a severance package treated when it occurs in a ch13? In the recent past our company had paid a weekly amount (previous paycheck amount) until the severance was used up, but recently they changed to paying out a lump sum. Would the trustee try to get the lump sum, leaving nothing to use to live while looking for a new job? Under the company’s old system, I was thinking a laid off worker would continue making the ch13 payments from the weekly severance payments, while also looking for a new job. With the new system I wonder if I’d be sunk. In today’s economy, I’m sure someone here has had it happen after filing. What did you do?

My read.

If you continued making your weekly/bi-weekly/semi-monthly/monthly payments to the Trustee... nothing would happen.

What you should be doing, is talking to your lawyer and getting your payments suspended. I would not use the severance to "keep paying" until it ran out.

You should then decide what the best course of action is. It could mean (attempting to) convert to a Chapter 7. What you really need to be concentrating on is whether you can secure a new job.

Again... immediately notify your lawyer that you've been laid off. You don't even need to mention severance unless s/he asks. In any event, what you want is a suspension of your plan payments. You need to be looking for a job, or considering conversion to a Chapter 7.

You are NOT sunk. You do NOT need to hand over the severance to the Trustee as you now have no disposable monthly income (DMI). You really need to work with your lawyer on plan suspension and then determining (quickly) how fast you'll be back to work and/or conversion to a Chapter 7. (I know, I keep repeating myself, but I think it's work saying.)

(And your question was hypothetical, but I answered it as if it happened yesterday!)

[Flamingo]

Your severance is a lump sum payment (or paid on your regular pay basis) to cover a certain period of time after you leave the employer. It would be the same as receiving your regular salary during your Chapter 13 and you would need to spread it out for whatever months it covers. As soon as one realizes they are leaving a company or is getting laid off, their Chapter 13 attorney should be notified immediately.