Wait to file until AFTER receiving severance/bonus?

[tdawg]

I was going to be filing this coming week, and I met with my lawyer last week to finalize things. I reminded him that I am being laid off Oct. 31, and will be getting a substantial check for severance/bonus. He looked at the amount, talked with me, and considered some alternatives, then told me that if I filed before I got it, then the trustee would take the non-exempt amount because I know I will be receiving it. He said he needs to talk to some colleagues, but that I should file after I receive it, but within the same month I receive it (so it won't count in the means test).

The difference for exemption purposes is that if I receive it after filing, he said he can only exempt based on the gross (before taxes) amount. There will be quite a bit taken out in taxes. Also, he said if it is direct deposited into my account, and I spend some of that money on bills (house payment, etc.), then he could exempt the amount that is in my checking account.

I understand his logic, but wanted to run it by this forum. If I received it after filing, he said I could have to pay $5k to the trustee.

[backtoschool]

Bonuses/severance payments are taxed as a lump sum payment and way more taxes come out. I got a severance in January and half of it went to taxes. Now granted that is because of my tax bracket and the fact that I lived in nyc at the time, but still, lump sum payments have higher taxes taken out of them so it will hurt you to have to declare the gross amount when you received no where near that much as your net amount.

So, I agree with your attorney. I think it makes sense to receive the check and then file. You can spend some of the check right away on expenses and that will lower the non-exempt amount.