It is the chapter 7 trustee’s job to find and liquidate assets for the benefit of your creditors. If you have an asset I cannot protect, like money in the bank, he will demand turnover of those monies so that he can use that non-exempt asset to pay back to your creditors.
Sometimes clients will want to give a really great explanation to the trustee on why they need this money more than he does. To be honest, each time they are right. Unfortunately, it doesn’t matter. The trustee has to do his job, he gets audited by the U.S. Trustee’s Office on his job performance, and he has no leeway to let you keep the savings, even if you have the greatest reason ever.
Now in a chapter 13, it’s a little different. If you have $10,000 in a savings account, you won’t have to turn it over, but you will have to pay at least $10,000 to your creditors over a 36-60 month chapter 13 plan.
In other words, you don’t lose it immediately, but you pay for it in the long run.
So, what should you do if you receive a severance package: you live on it. Once it’s all spent, then you file bankruptcy. Just remember to save enough to pay me for your case. 🙂