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Elizabeth Prentice
Elizabeth Prentice, Attorney
Category: Bankruptcy Law
Satisfied Customers: 170
Experience:  Managing Attorney for one of the largest consumer bankruptcy firms in America.
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I recently resigned from Federal Service and I want to file

Resolved Question:

I recently resigned from Federal Service and I want to file for Chapter 7 bankruptcy in the State of Colorado where I reside. The past 6 months I have been on paid sick leave due to a job related illness. Therefore, I have been paid with my personal accrued sick leave in lieu of my normal salary because I did not actually work.

My question is related to the means test to qualify for Chapter 7 bankruptcy. Would the monies I received for 6 months of sick leave count towards my income threshold? I previously had a large salary. In other words, can I file for bankruptcy immediately or do I need to wait 6 months to lower my average salary below the means test threshold?

By the way, I accepted a cash settlement for the job related illness in lieu of workers' comp. If I keep this in a separate account, I assume those monies will be exempted as well. Correct?

My final question is related to unemployment pay I plan to receive. If I put all of my unemployment into a separate banking account (not comingled with other funds) but sell my non-exempt personal property to cover my living expenses while I wait to qualify for bankruptcy, would the courts possibly dismiss my bankruptcy request or take other sanctions like take the exempted unemployment monies I saved in the separate account?

Thanks.

Terry
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  Elizabeth Prentice replied 1 year ago.
I am a bankruptcy attorney and I would be happy to assist you. First, in order to qualify to file Chapter 7 you must meet the 2013 Department of Justice 'means test.' That means test states that your gross (before taxes and deductions) for 1 year must be under the following in CO:
1 person household: $49,549
2 person household: $65,631
3 person household: $72,259
4 person household: $86,787

They determine the above figures by looking at your pay stubs or documents showing income from exactly 6 months prior to your bankruptcy filing, then multiplying by 2.

Workers’ compensation is exempt except for employer reimbursement and court-ordered support. Colo. Rev. Stat. § 8–42–124. This means that the government will use it to determine your income, but they may not take it from you.

Unemployment compensation is exempt as long it is not commingled with other funds and except for the enforcement of child support orders. Colo. Rev. Stat. § 8–80–103. Therefore, you may keep it in a separate account and it will also be exempt. However, it will also be included in determining your gross income in the means test to determine whether you qualify for Chapter 7. Only SSI received as unemployment is found to be not gross income in determining qualification of the debtor for Chapter 7.

I hope my answer has assisted you and that you will leave me a positive rating. Please feel free to request me by name in the future.
Elizabeth Prentice, Attorney
Category: Bankruptcy Law
Satisfied Customers: 170
Experience: Managing Attorney for one of the largest consumer bankruptcy firms in America.
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