Lump sum cash payment during ch 13

[inbigd2]

Hello

My final payment on a 5 yr ch 13 will be on 08/10/11. I am eligible now to retire and one of the benefits of retirement is a lump sum payment for unused leave, in my case about 20K. To ensure that the 20k is not taken by the court would I be safe retiring after 08/10/11 or do I need to wait until I have the discharge in my hand? If I retired now would the court even know that I got the 20k?

thanks

[justbroke]

This is an excellent question of law! That's why I can only speculate. To put it simply, unless you're in a 100% plan, the law -- and your plan should -- clearly state that in order to receive the benefit of the discharge you surrender all disposable income to the custody and control of the Trustee.

Unfortunately, you're in a gray area on this one. I would say that it's "earned" but "unpaid" income. Since it accumulated or was accumulating during the pendency of your Chapter 13, the strict thinking side (conservative) of me says that it is already property of the Estate. The more liberal view would say "well, it hasn't been paid yet", so it isn't property of the Estate.

The real issue is found in the underlying State non-bankruptcy law. The question really is, do you have a contractual right to the vacation pay before it's paid! There are a few cases on this, and I looked into this as well. My question was more of a bonus, but my bonus is not guaranteed, and, in fact, my employer indicates that we have no right to payment until it's actually paid. (Yes, those are the words that they use.) Many smart employers, like mine, never show a "right" to vacation or vacation pay in the employee manuals. It is always "discretionary".

This is how my employer is as well, and probably due to litigation caused by employee separation, not due to bankruptcy or other process.

So, I'd first find out the laws of where you live (Texas) and then how your employer deals with this. (I looked at Texas quickly, and there are no "vacation" laws in Texas.)

[Flamingo]

You need to discuss this with your attorney. Just shortly after we filed for Chapter 13, my employer filed for bankruptcy. I immediately found another position under the instructions of our attorney. During our Chapter 13, I received a lump sum payment of unused vacation and sick time after the bankruptcy was settled and distributions made. I had to report this to my attorney who checked with the trustee since I was entitled to receive that sum during the course of our Plan and knew the funds would come in. It was about $3,800 prior to taxes and I was allowed to keep the entire sum. The main thing is I reported it. In your situation, you are aware of these funds and are planning your retirement accordingly hoping to keep the funds out of the radar of the trustee. Speak with your attorney to be on the safe side.

[walkthaplank]

Yes, check with your attorney. But if it were me, I would wait until your case is discharged and closed to be safe. Technically the money isn't yours until the check is cut. The down side is that it could take months for this to happen and you are no doubt suffering from short timers syndrome! Congrats on the impending completion of your plan and upcoming retirement.