Severance Package

[alana]

I'm a few months into my chapter 13. It's a great plan, $100 for 36 months. My plan is confirmed.

I just found out my job is moving about 100 miles away. I can't afford to follow it because the rents are about 50% higher than where I live now. I have a 401k loan that if I did a withdrawal and paid it off I could then afford to move, but I really don't want to touch my 401k.

The company is offering a severance package of 1 years salary plus $25,000. I have the option of a lump sum or monthly payments for 18 months. I will get full retirement, but I'm only 50 so I will roll it over into a IRA. I will also be able to collect unemployment. My income will go up for 18 months but then it will be much lower. Of course I will be looking for another job.

How is something like this handled in a bankruptcy? Are unemployment checks exempt? Will my payment go up? I have a call into my attorney, but while I wait for her call back I thought I would see what all of you think. Thanks

[lrprn]

I just found out my job is moving about 100 miles away. I can't afford to follow it because the rents are about 50% higher than where I live now.

Sure you can. Just have your lawyer amend your Ch 13 plan to reflect your changed rent circumstances. It's a significant, long-lasting change so that's allowed.

You didn't say why you were in a 13, but if you originally wanted to be in a Ch 7, this increase in rent might reduce your disposable income enough make it possible to convert to Ch 7. If you would rather file Ch 7, ask your lawyer how this change of circumstances will affect your 13.

I have a 401k loan that if I did a withdrawal and paid it off I could then afford to move, but I really don't want to touch my 401k.

You are very smart to *not* touch your 401K during an active bankruptcy.

The company is offering a severance package of 1 years salary plus $25,000. I have the option of a lump sum or monthly payments for 18 months. I will get full retirement, but I'm only 50 so I will roll it over into a IRA. I will also be able to collect unemployment.

Well, this could be a problem. Ch 13s can 'look forward' after filing. Significant increases in income regardless of the source can perk up your trustee's ears to trying to get more for your creditors. You absolutely need to discuss how to handle this with your lawyer.

All is not lost, but you need to know exactly what your legal options are around the severance and unemployment funds before doing anything. Good luck - I hope everything works out in your favor! Keep us posted.

[Flamingo]

I'm a few months into my chapter 13. It's a great plan, $100 for 36 months. My plan is confirmed.

I just found out my job is moving about 100 miles away. I can't afford to follow it because the rents are about 50% higher than where I live now. I have a 401k loan that if I did a withdrawal and paid it off I could then afford to move, but I really don't want to touch my 401k.

Discuss witih your attorney. Did you know your relocation expenses are tax deductable since your your employer is moving that far a distance away if your employer does not pay for your move/relocation expenses?

The company is offering a severance package of 1 years salary plus $25,000. I have the option of a lump sum or monthly payments for 18 months. I will get full retirement, but I'm only 50 so I will roll it over into a IRA. I will also be able to collect unemployment. My income will go up for 18 months but then it will be much lower. Of course I will be looking for another job.

How is something like this handled in a bankruptcy? Are unemployment checks exempt? Will my payment go up? I have a call into my attorney, but while I wait for her call back I thought I would see what all of you think. Thanks

You need to report all this to your attorney if you go this route. Your income will increase each month for 18 months with the amount of the unemployment as you are receiving your regular monthly income in your severance for the same time period. Lump sum will nail you badly for taxes withheld. The $25,000 would be income for the year in which received if a lump sum and also increase your income over the 18 months over the unemployment if it can be paid monthly also for 18 months. You will also have state and federal tax issues to review along with all this depending on what you do. Your attorney can guide you accordingly as to your situation[

[catleg]

I think if you choose for the severance to be paid out over 18 months you will not qualify for unemployment during that time. Since in effect you're still collecting your salary. Have you thought about how your health and disability insurance situation will be affected by this?

[alana]

You didn't say why you were in a 13, but if you originally wanted to be in a Ch 7, this increase in rent might reduce your disposable income enough make it possible to convert to Ch 7. If you would rather file Ch 7, ask your lawyer how this change of circumstances will affect your 13.

The reason I'm in a 13 is my 401k loan. I didn't qualify for a 7 with it.

You are very smart to *not* touch your 401K during an active bankruptcy.

I don't want to touch it, but it would be the only way I could afford to live in the San Francisco Bay area.

I think if you choose for the severance to be paid out over 18 months you will not qualify for unemployment during that time. Since in effect you're still collecting your salary. Have you thought about how your health and disability insurance situation will be affected by this?

I know others that AT&T has done this to and they are receiving both the severance and unemployment since it is an office closure. I was hoping unemployment was exempt?? Since I will also be retiring I keep my health insurance.

I also have the option of taking a 30% increase on my retirement but I was leaning toward the severance because I would have my full salary for 18 months and it would give me time to find another job. I think if I took the 30% option I could convert to a 7. The only thing being paid in my 13 is my car (i owed $800 on it) and my attorney.

Thank for all your input.