need REALLY urgent help as to whether severance is income for CH 7 6 mo lookback...

[IamOld]

Hello - I've been reading this forum now for a few weeks - met with bkpcy atty on Wed of this past week - have meeting TOMORROW to sign papers - in the rush and confusion - (I work like seven jobs and are almost never home) I forgot one thing...we gave him paystubs back 6 mo, but I forgot about my severance payment...anyway, we went from needing to go to Ch 7 to HAVING to file on Monday because because of my jobs I make too "much" money.

So my question is this - when I was laid off, I had taken the severance owed at layoff in installments only because it continued the health ins. Otherwise, had I taken it when I was laid off in a lump sum, it would be around 8 months ago.

SO my question - is there any way to exclude the severance payment? Because if not, I think I'll be over the Ch 7 means test...in other words, does it matter that the severance was owed at time of layoff just paid in installments for my convenience??? (Well, health insurance continuation)

THANK YOU!!!!!!!

[tcreegan]

Hi IamOld,

You need help all right....but not from us (even though we are nice people)...you need an established and very competent BK attorney. Whether the severance is income or not is going to come down to what the BK trustee/US trustee/BK judge are going to allow.

Getting a lump-sum in the 6-month lookback period is not settled, some courts say exclude it, some don't, trustees seem to want to include it, the rule is "all income, all sources" from any source not specifically excluded in the BK law. (soc.sec., tax refunds, loan proceeds) Getting it in payments isn't going to make this any easier.

And if that isn't enough, if the trustee labels it "earned but unpaid" then whatever you haven't gotten yet goes into the BK estate. We had a poster here get slapped w/ that on their vacation days. All the days not used b4 filing had to get paid into the BK estate...really, really sucks.

You need a very good BK attorney who knows the local trustees and will go to the mat for you!

Tom in Colo

[IamOld]

THANKS A TRILLION!!! Well, then we may need to wait 2 months so that it isn't in the lookback. The thing is though, HAD I taken the lump it would have been EIGHT!!! months ago - about four pays are in the six month lookback only...nothing else from ex-employer.

Another question - if I raise what I have withheld for fed tax - so in other words, if I have my side jobs basically withhold most of the check for fed taxes, does that essentially deduct most of that paycheck? (HOnestly, I REALLY could use to withhold a lot more from my checks!)?!?!

[IamOld]

And if I may add...

My "extra" jobs are contingent - there is no guarantee of any of them continuing beyond a particular contract!

[Flamingo]

The amount of severance you received at layoff covers a certain period (i.e., one month, six months, one year, etc.). When you receive severance, you are receiving income (settlement) from your former employer that covers that specific period of time as if you were still working. That is why one cannot receive unemployment insurance if you have a severance lump sum or monthly payment for the time period specified. One is supposed to "stretch" a lump sum severance over that specified time (of course most people don't).

[IamOld]

Thank you!!! ANd of course you're right...however, in some states, like TN, MN, and IL, (NY too I think) you CAN get unemployment WITH severance - needless to say OF COURSE not in VA...well, I guess I'll find out tomorrow...

Thing is Ch 7 (I'll even take 13!!!!) is the best solution but if it wasn't for ONE creditor who wouldn't agree to a payment plan, I wouldn't be here (guess who - HSBC).

[discouraged]

You cannot get unemployment if you have severance in MN. I was told to apply right after I was laid off and they did not start my UI until after my severance was technically done. I was paid for four months after I was laid off and they treated it as a paycheck. It might have been different if I'd received a lump sum, I do not know as that is not what happened with me.

But, like an idiot, I also took out my 401k and ui did not start until they calculated that would be spent - so that was a lose/lose situation I got myself into - especially because I used most of it to pay off creditors. Oh well, it is done and gone and an expensive lesson learned.

[tcreegan]

Hi IamOld,

....really grasping at straws here...does the agreement w/ HSBC have an arbitration clause?

My thought on the witholding is that your tax refund is a cash asset that the trustee can claim for the BK estate. Assuming you already spent any 2010 refund, the only part the trustee can get their hands on is the pro-rated 2011 refund. Rumor has it that trustees aren't interested until May or so, but some people post about trustees being obsessive over tax refunds.

Good luck working w/ HSBC HA!

Tom in Colo

[IamOld]

thanks Tom!

Tax refund? What's that???? I almost always owe...owed in 2009 will owe in 2010, and HOPE..HOPE to come close to breaking even in 2011!