Expert: Terry Leeders - 9/22/2008

Question
July of 2007, I and my wife filed Bankruptcy Chapter 13. I was informed just today 09/22/08 that my job is being eliminated at the end of the year. My company is going to give me a severance package which amounts to about $25,000 dollars. I am 57 years old and will be forced to turn the Chapter 13 into a Chapter 7 and will have to file against my house which I still owe $85,000 dollars on. Other than filing for unemployment this will be the only money that we will have to live off of until I find something else to hold us until I can retire. My question is by filing Chapter 7 bankruptcy will I have to give up the severance package that my company is offering me?

Answer
The severance package would skew your means test calculation (6mo budget test) so you would need to watch the timing of the conversion.  It would also be an asset, subject to your state exemptions, so you would want to make sure it is depleted on necessities.  Talk to your lawyer, as it may be best to just use those funds to pay the mortgage and the Trustee.