Employees Accepting the VBP with a Chapter 13 Bankruptcy – Payments Held Up and Sent to Trustees

TSEA September 3, 2015 0
Employees Accepting the VBP with a Chapter 13 Bankruptcy – Payments Held Up and Sent to Trustees

TSEA received telephone calls starting on Tuesday from members who accepted the Voluntary Buyout Program (VBP) and also were on a Chapter 13 Bankruptcy repayment plan. Those who accepted the VBP were to separate from state government on July 31, and were to receive their lump sum August 31st. Members informed us that instead of receiving a check, they received a notice that their entire lump sum buyout payment would be sent to the bankruptcy trustee’s office. We also learned that some employees have not received anything in writing, and they learned about this from coworkers.

Because this was a serious problem for those members, TSEA immediately began making contacts to several agencies that would possibly be involved with the decision, including DOHR, who informed us that contact should be made to the Attorney General’s Office. From contact with the AG’s office, TSEA was informed that the decision was based on their legal understanding that “any pay of the employee is to be included as part of the employee’s estate” and therefore must be sent to the respective trustee. We understood the explanation, but believed there should have been information included with the VBP Q&A’s to warn employees about payment for those in bankruptcy, along with other mandated deductions. Having this specific information may have affected some employee’s decision of whether or not to accept the VBP.

TSEA was greatly assisted by the Attorney General’s Office. We commend and thank that office for providing specific information about this issue, and for the extra steps they took to help with possibly getting the funds back into the hands of those employees as quickly as possible. The AG’s communication with the statewide trustee offices were to make them aware of what occurred, that the payments would be in their hands very shortly and to urge them to review the cases and move expeditiously to return the funds to the employees as quickly as possible.

TSEA staff has also reached out to the regional trustee offices; several of which are more willing to expedite the process. However, we are being told that in some of the districts, the employee will need to have their bankruptcy attorney to file a motion to the courts requesting return of the VBP payment, or the appropriate portion.

Many employees now have received their final paychecks. These affected employees were depending on funds from the buyout to make mortgage payments, pay insurance premiums or other expenses, because remember they are no longer an active employee and being paid as such. Employees impacted by this will now have to wait several weeks before they receive their buyout payment, or a portion of that payment, which could also seriously impact employees 65 and older awaiting the $3000 allocation as part of the VBP to transition to the Medicare.

TSEA observed and monitored the 2008 buyout and it was our understanding from a previous administration official that at that time if an employee was in a Chapter 13 bankruptcy, funds were not sent to the trustee but instead to the employee and it was their responsibility to inform the trustee’s office.

Members affected by this with any questions, should contact the TSEA office.

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