Unemployment Compensation in Bank Account Held Not Exempt

A common bankruptcy issue is whether the right to receive an exempt asset, such as worker’s compensation or social security, extends until after receipt and the funds are sitting in the debtor’s bank account.  (The above assets would continue to be exempt).  But what about unemployment insurance?  Apparently, no case had been decided  previously.  A person receiving unemployment generally needs to spend this payment for necessities.

But a case decided this past week held that $15,631 in a bank account from unemployment was not exempt. (I must assume the husband and wife debtors had savings and used the savings money first for living expenses.  They saved the unemployment hoping this would be exempt.  This is a practice my Fort Lauderdale bankruptcy clients have utilized in other contexts, such as saving social security income in one bank account and spending for living expenses from non-exempt savings.)

Judge Williamson in the Middle District of Florida reviewed the language of other exemption statutes.  In re Swetic, 2013 Bankr Lexis 926 (Bankr. M.D.  FL.  March 12, 2013).  Other statutes more clearly exempt the benefits after received or proceeds of the assets.  But the unemployment statute, Section 443.051(2), did not contain any additional language. The Court sustained the Chapter 13 Trustee’s objection to the claim of exemption of the bank account with the unemployment funds.  (Note, in a chapter 7 these funds would be turned over to the chapter 7 trustee.  In a chapter 13 bankruptcy the funds would not be surrendered, but the debtor would have to pay the value of the asset during the chapter 13 plan.)



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