Retroactive Payment

March 8th, 2006 by Questions

I just declared bankruptcy last week. I am also awaiting a decision for CPP disability benefits. If I am approved and receive a retroactive payment during my discharge period, how is that to be handled? How much of it can I expect to have go to my trustee? Would the month I receive it in be considered surplus just for that particular month. As it is now, my monthly income is below the allowance for a single person.

What would happen if a retroactive payment from CPP is received AFTER my discharge period? Would I then not have to worry about any disbursements going to my trustee?

Thanks in advance for answering my questions. When I posed these questions to my trustee, the answer given was very vague. I want to make sure things will be done as per protocol.

Questions

One Response to “Retroactive Payment”



March 09, 2006 at 3:42 pm, A licensed trustee said:

I suspect your trustee was vague because you were asking about future events – not from some deliberate intent to confuse you.

Under the current legislation, your trustee has 3 options if you receive the retropayment during the period that you are an undischarged bankrupt:

1) Treat it as a windfall and seize the whole thing for the benefit of your creditors;

2) Treat it as income in the month that you receive it (in which case it would be subject to the surplus income rules); or

3) Calculate how much related to the period before you filed your assignment and treat that as a windfall and the rest as income during your bankruptcy.

An argument can be made for each of these approaches.

If you don’t receive the retropay during your bankruptcy then the trustee can choose to ignore it or they may ask the Court for a Conditional Order of Discharge requiring you to pay a portion, perhaps all, of the retropay to the trustee for your creditors.

Now do you see why your trustee may have seemed vague? If you have already filed then you’ll simply have to wait and see what happens. If you haven’t filed yet you may want to discuss this with your trustee so that you have a better understanding of what they are likely to do in your case.

Each person’s situation is unique – that’s why we can’t (and probably why your trustee didn’t) tell you what is going to happen.

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