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grantlawpc, Attorney
Category: Bankruptcy Law
Satisfied Customers: 31
Experience:  United States Bankruptcy Code: Chapter 11 Business Attorney; Restructuring and Recoveries
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I received notice that my position with my employer was eliminated

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I received notice that my position with my employer was eliminated on November 14th, 2011 and I filed Chapter 13 bankruptcy on November 16th, 2011. My My employer sent me a severance agreement in November stating that my last day of employment was December 14th, 2011 giving me 30 days to find another job within the company but I was unsuccessful at doing do. I had to sign the severance letter (18 weeks of severance pay) after my last date of employment which was on December 21st, 2011.

I tried hard to find another job without success. Subsequently I converted to a chapter 7 bankruptcy on March 27th, 2011. My last severance pay check was received April 20th, 2011.

The trustee is saying that he is entitled to all of my severance pay received in april? Is this correct? I was using the money for normal living expenses like rent, utilities, and childcare during my attempts to find employment. I don't have any of the severance apy to give back to the trustee?
Very interesting question.

Thanks for providing all the dates, that is very helpful.

When you say "trustee" are you referring to the Chapter 13 trustee or the Chapter 7 trustee? I'm going to presume you mean the Chapter 7 trustee.

Also, I of course defer to whatever your personal bankruptcy lawyer is telling you. I presume you are just looking for more helpful input.

The primary question is "when" was the April severance pay "earned." Or in other words, was there any thing that could have happened where you would not have received the April payments. For example, if you had gotten a job on March 27, would you still be entitled to the April payments. If so, the Trustee has a decent argument that the pay was not postpetition earnings, but rather merely a receivable existing on the date of conversion.

If however, you would have lost the funds if you had gotten a job on the conversion date, then arguably the receivable had not yet vested and was therefore not an asset of you (and the estate) as of the conversion date.

That is my reaction.
Let me know if I'm missing the point of your question!
Customer: replied 4 years ago.
Thanks so so much! You are correct on all points.
I had not gotten another job by the conversion date.
I was talking about the chapter 7 trustee.
The trustee and the trustee's lawyer are saying that my severance letter states that I was paid through December 14 date of my seperation by McKesson and that the severance pay was an "agreement" and not considered part of my pay from McKesson and is why they are entitled to it for April.

The problem is I don't have that money any longer. I wa using it for normal living expenses like rent and food so I don't have it to pay back. The demand letter from the trustee says I have to give them $9k but I spent it. So I sent my attorney my bank statements for april and may showing that the money was used for normal living expenses. The severence letter does say that the money ends if I find another position within my same company McKesson but not if I find something outside of the company. Trouble is... With the economy I wasn't able to find another job in my field and I'm working two part time jobs now to make ends me but I was not employed on my conversion date. Any further thoughts or points I should ask my attorney to make?
So I guess the argument would be that the payment of the severance in April was not yet "earned" by "nonemployment by McKesson" That at least gives you something to work with.

Moreover, I don't know what exemptions you used (state vs. federal), but the federal exemptions do a fairly large (>$11k) blanket exemption for anything, including receivables. Talk with your lawyer about whether you can claim it as exempt at this point. (In Florida and Texas, people use the state exemptions to take advantage of the large homestead exemptions; however, I'm not sure (and not qualified to comment upon) Arizona exemption law.

You might have some problems with exemption deadlines (and your lawyer might be a little nervous about having missed declaring the receivable as exempt). Did you tell him/her about the severance agreement?

The poverty defense is fairly effective -- I just wonder how aggressive the Chapter 7 trustee might be about objecting to your discharge because you "converted" estate assets.... When was the deadline to object to your discharge?

That's all that comes to mind at this point.
Let me know if I can give you any more detail!

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