Question Aren't UI benefits protected in bk filings?

[omgato]

I've been unemployed since March 2020 and my only income has been UI benefits. Several times over the last 18 months, AzDES (who handles UI in my state) didn't pay my benefits for months at a time, so I would get lump sums once they pulled their heads out of you-know-where. This caused a lot of the financial problems that are making bk necessary, like not being able to keep up with the debt mgmt plan (DMP) I had in place.

I was sued by a creditor who won a judgment against me and has the right to garnish my wages. I start a new job next Monday. I had all my paperwork done to file pro se. Except I did not receive my UI for nearly 4 months, from April to mid-July. Had to get the state ombudsman involved and then AzDES sent me a direct deposit for $6300.

Since this is back pay for UI benefits, is it protected in my bk filings? The amount is above exemption but that's due to AzDES issues, not me hoarding cash. I lost my apartment for not being able to pay rent literally days before AzDES finally paid me

[justbroke]

First, Welcome to BKForum!

I know it's a evasive answer, but it depends. It depends on which chapter of bankruptcy, and maybe even State non-bankruptcy law (exemptions). So we'll just talk generally, without considering Arizona specific exemptions.

In a Chapter 13, a debtor gets to keep all of their property (physical, virtual, and money). The debtor gets to keep all the property because they pledge to pay at least as much as the creditors would have received in a Chapter 7 liquidation. So a Chapter 13 is much easier to deal with relatively small amounts of money and property. Exemptions can play a big role, in reducing that "minimum," but a Chapter 13 deals with this much more easily if the debtor already is showing some disposable income (or DMI).

For Chapter 7, it's an entirely different ball of wax. Your State's underlying non-bankruptcy exemptions could protect some or all of "past" unemployment benefits. For Arizona (AZ), and I only glanced at it, unemployment benefits are protected both in a debtor's right-to-receive and any benefits already received. However, benefits received must never be commingled. If you had them going into an account where you put in any other money, that exemption right could be at issue.

I'm not an attorney and I am not in AZ, so don't take this as the final word. However, the AZ statute which deals with this seems rather clear. No commingling. (And there appears to be some exceptions if you owed child support or other governmental recoupments for certain public programs.)

Besides, you'll probably spend much of that amount in your search for an attorney and/or an new place to live.

@desprifreya would know more details on specifics in AZ or where you could get into some trouble.

[omgato]

Thanks so much for your reply. I am filing Ch 7 with no assets aside from what's in the bank and my car and no codebtors. It's a pretty straightforward case, which is why I was going to pro se it.

The UI lump sum was deposited into a bank account opened in May that only had an initial deposit of $100 and no other activity prior to the UI deposit.

I mean, if the trustee wants to go after that $100, okay, but that was likely from UI funds or my student loan, which are the only income flows I've had since losing my job.

I found a refer to Ariz. Rev. Stat. § 23-783 (A) on Upsolve's list of AZ exemptions: "Most people use Ariz. Rev. Stat. § 23-783 (A) to cover unemployment compensation. For single debtors filing, it has no coverage limit."
But it's not on the list of exemptions the court clerk sent me and nothing is really coming up in an online search.

[justbroke]

Well, the AZ Bankruptcy Court does provide a sheet and 23-783 is clearly listed under Public Benefits for the category "Unemployment Compensation."

https://www.azb.uscourts.gov/sites/d...Exemptions.pdf

Unfortunately, this is the downside of doing things Pro Se. Unless someone is an attorney practicing in Arizona, they can't give you legal advice on exactly which exemption to claim. I do list that Exemptions PDF document from the AZ Bankruptcy Court. It clearly shows an exemption for unemployment compensation which has not been commingled.

I would obtain 3-5 free consultations to be sure that you are thinking about whether the money can be correctly exempted using that ARS (statute) that you listed.

[despritfreya]

Unfortunately, once those funds hit your bank account and were co-mingled with other funds, they lost their tracing to unemployment benefits under Arizona law. This is why I really like the idea of a prepaid card (if that's the right term) that folks get from DES. Never a co-mingling issue.

Please state the exact amount that was in the account moments before the benefits hit. Please state the amount that has been deposited in the account since the benefits were deposited (not the $6,300 but rather how much since that amount). The argument is "first in - first out" but that is a tough one.

Unless you hold off filing until the account is within the allowed $300 exemption (properly living off the funds and keeping detailed records), I believe that you will have a fight on your hands with the Trustee.

Edt: Just saw that there was only $100 in the account and no other activity. This changes my thought process. Claim the exemption and make sure the account is at or below the amount given by DES.

Des.

[omgato]

despritfreya Indeed, the bank account in question was opened in May with a $100 deposit and had no other activity until the DES lump sum was deposited.

I am currently living off that money until I start my new job and get paid, probably towards the end of August.

At this point I plan to have my future paycheck direct deposited into an older account so the UI benefits remain separate for now.

I have several bank accounts as my car is with a CU in Texas that requires a savings acct, plus my newer CU where the DES funds are. Those savings have >$17 each.

[despritfreya]

I have several bank accounts as my car is with a CU in Texas that requires a savings acct

Since you referenced a bank account and car loan through a Texas CU, just checking to make sure you have lived in Arizona at least 2 years. If you have lived here for less than 2 years before you file the bk, you cannot use Arizona exemptions.

Des.

[omgato]

I've been in AZ for 4 years, bought the car right before I left Texas.