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Severance Pay After Filing for Bankruptcy

Suppose I file for bankruptcy and have to wait 21 months for discharge due to surplus income, and one year after filing, receive a substantial severance from an employer. How will that money be treated in a bankruptcy?

Posted from: Ontario

One Response to “Severance Pay After Filing for Bankruptcy”

A licensed trustee said...

The treatment will depend on your situation, that ius, on how quickly you find new work. Most trustees will apply the sevarnce income to the period it relates to. If you recieve 10 weeks then they’ll divide the amount by 10 and apply it each of the 10 weeks. If you have already found a new job then the severance might be treated as income in the month you receive it, or it might be treated as a windfall.

I suggest you speak to your trustee about this, either before you file, or if you have filed then right away to determine what is going to happen.