Question re: layoff during Chapter 13

[159515951]

Hello everyone,

My wife and I are 30 months in to a 60 month Chapter 13. She was laid off on Friday, but received a severance package. My questions are as follows:

1. Do I have to report the severance lump sum to the trustee? We plan to if my wife gets another job before the money runs out, but aren't sure what the protocol is otherwise.

2. How long should I wait to modify our plan for the decrease in income? We have enough to sustain us for a few months (hopefully) -- I assume the trustee wouldn't be interested in lowering our plan payment until such time as the severance runs out and we are no longer able to pay the monthly Plan amount -- correct?

Many thanks for your assistance.

[andy158]

I would definitely contact your attorney with this. The severance package is a benefit from the employer to bridge the gap until you find new employment. It is not a windfall or "extra" income. It is a lump sum of wages for x number of months and should be treated as such. The trustee may see it otherwise. I am sure unemployment compensation would not cover the expenses paid by the missing income.

[BNKRPTinNC]

A chat with your attorney, as Andy suggested, is probably in order. Particularly if your wife is unable to find immediate employment and you can't sustain the plan payments. The question then arises, if you get the modification what happens if your wife finds another job? On the other hand, I'm of the opinion that if your wife does not find work before the severance money runs out then no harm no foul. Even if your wife finds work right away if the amount of money is not over 10% of your gross income for the year (which tends to be the general rule) it's most likely of no concern to the trustee. Now I'm speaking from the standpoint that you have a trustee that does not micro manage your plan. The only time I had any contact with mine was when I received bi-annual accounting reports.

[159515951]

Thanks for your responses. We did speak with our attorney today, and he told us to touch base in a few months when we get close to running out of severance. At that point, we'll reassess, and either keep things status quo, petition to modify the plan, or convert to a 7. Obviously, the decision will depend largely on whether a new job is in the near future.