341 Today - Still very uneasy? - Trustee Attorney

[AngelinaCat]

Cat. The court doc. Application for emit meant of counsel for trustee. It states that the services rendered are to be : giving legal advice : representing trustee in connection with negation a involving secured and unsecured: preparing applications motions answers orders reports and legal papers : obtaining assets from debtors : performing legal services to locate ad obtain assets.

AARRGH! Phooey, and nuts!!

I had hoped that something would appear in the header to the effect of "Attorney is being hired to conduct a 2004b Exam". We had that happen to us.

That doesn't seem to be happening in your case. Perhaps your trustee's attorney and the resultant paperwork/questions is something peculiar to YOUR particular District and/or trustee?

I cannot begin to venture a guess about this. I am in Florida, and you are in Arizona.

What district are you in? It might help Des, or another Arizona resident better able to respond.

[rjroyse]

huh - well I am in Peoria - Maricopa County. legislative 22 and congressional 8

[despritfreya]

rjr,

Please stay on line. It will take me a while but I have a lot to say so need to type it, review it and then post it. I am going to review your other thread now.

Des.

[AngelinaCat]

rjroyse, this is an Excellent development! Please stay online. Des is an attorney in Arizona, and is the best one able to advise at this point!

[AngelinaCat]

rjr,

Please stay on line. It will take me a while but I have a lot to say so need to type it, review it and then post it. I am going to review your other thread now.

Des.

Thank you Des

[despritfreya]

rjrose,

From what I gather the following sums up what is going on.

You and your husband ran a business that failed. The business was either a corporation or LLC. You and/or your husband either personally guaranteed business debt or used your personal credit cards and incurred over $200k in debt related to the business. In addition you have business related taxes. While you indicated those taxes include sales tax to the state and various cities you did not indicate if the entity owes payroll taxes. Nor did you state the amount. Nor did you state if those taxes have been assessed against you personally. You indicate that on the personal side you do not have much debt but you did not indicate how much “not much” is. Personal debt would include mortgage payments, car payments, personal loans (including any from family) lines of credit, medical bills etc - anything that was not used to benefit the business.

You rushed into filing and, as a result, did not get much information from the attny you hired. In fact, you did not meet with the attny before the case was filed. If that is correct, such is a HUGE red flag. Someone at that firm advised you to file a Chapter 7. If you did not meet with an attny before filing I am not sure how someone could have given you proper advice. It appears that the law firm put you in a 7 without full disclosure of the problems you might face especially in light of the fact that you ran a business, have tons of non-exempt personal property and have tons of cash lying around.

There seems to have been a concern over whether or not you “qualified” for a 7. You were worried about the gifts your folks gave to you. In our district (AZ) those gifts should have been reported in your 6 month average HOWEVER, I am not even sure you needed to “qualify”. Did your attny determine that you were a “consumer case” as opposed to a “non-consumer” case? To be a “non consumer” case more than 50% of ALL of your debt has to be related to the business. I know $200k plus the taxes are not “consumer” in nature. What other debt did you list? Maybe a mortgage which could tip the scale in favor of a consumer case. Now, this issue may be a non-issue at this time but I wanted to mention it.

There also seems to be a concern that your Trustee hired his/her own attny. Don’t worry about this. Your case is not a “cookie cutter” case therefore your Trustee needs assistance in handling it. This happens all the time.

My BIG issue is that your attny apparently “allowed” you to file the Chapter 7 knowing full well that you had $13,000.00 sitting in a bank. I asked you if the account was an IRA. You indicated you did not know. That tells me it IS NOT an IRA. To further my assumption you also indicated that you “now know” those funds go to the Trustee. This makes me more upset than you can imagine. If those funds were not in a qualified retirement account why on this planet did your attny allow you to file? Those funds, which will now line the pocket of the Trustee AND the Trustee’s attny probably should have been spent before you filed. You needed pre-bk planning. If the taxes are owed by you personally (and this I cannot say as there are very specific rules regarding pass-through sales taxes), the funds could have be utilized to pay down (to the fullest extent possible) your non-dischargeable taxes. Now, maybe your attny made a calculated decision that the tax obligation belongs to the business and not you personally but, considering the mistakes you mention and the lack of communication with an attny, I doubt he or she even thought about it. Even if the funds did not go to the taxing agencies there were tons of things you could have done with the cash so that you would have benefitted the most. Unfortunately, you rushed into filing and now the damage is done. Personally, I do not like my clients giving gifts to the Trustee.

As to the personal property, your Trustee will simply sell the stuff to the highest bidder. If that happens to be you then you can buy back the items. The Trustee (rather the Trustee’s attny) will be in touch with your attny to work out how the sale will take place. If you are the high bidder the Trustee may or may not allow you to make payments. Some trustees are easier to deal with than others.

Personally, since your comments are all over the place and you clearly do not have a good understanding of your own case, I have real concerns. I want my clients to be comfortable about their case. They need a working understanding of the process, especially when the case is not a “cookie cutter” case. If you are not understanding the process you need to sit down with the attny (not the paralegal) and discuss everything until you understand. Take notes. Heck. . . even record the meeting. And, by all means, keep us at bkforum posted on the progress of your case.

Des.

[rjroyse]

thank you Des.

Wow - that is a lot and I am trying to not freak out more.

Couple things for you. I have had a steady job for the past 7 years. so yeah for that. Husband after he was fired, bought a business. got some partners, who took us for a ride. We got rid of them once we figured out what was going on, but then was left holding the bag of debt with it. So he ran it the best he could.

Our accountant did us no favors. Last year we were notified by the IRS that we had not been paying taxes. we tried to work out a payment plan but it go to the point where it was just too much. We sold the assets this spring and that just covered the trust account for the fed taxes owed. There was state withholding that also were not paid, I think we have those now. and then the PT. that is a big question.

Yes, we signed personal guarantees on several things. we did meet with attorney many months ago and decided to do 7 on the business. but when we realized the extent of the pass through of debt and the possibility of suits against us we were advised of the 7 for our selves. providing we passed the means test.

We did, but with my husbands new job there was the fear that if we waited much longer we would not . so we did. Personal debt. Three credit cards, mortgage (we are underwater on this one) and car payment (and under on this as well) that we were able to make with husbands new job and my income. Extra company debt added on to it? not so much.

I will take some responsibility for the 13000. when asked to list retirement accounts - since that is how I had it in my head, that is how I listed it. but I did list the company and accounts etc. but I was never really questioned as to the type. and me being stupid didn't know to ask or point it out.

Everyone is thinking however that with the priority claims, that the money has to be used to pay down that debt first before it goes to consumer debt or non priority. I hope that happens.

of the three non-exept assets that they are looking at. there are only two I will try to get back. Do we simply give the items to the our attorney once they request them?


thank you for your help. with as high as my attorney bill is right now, I am not sure how much more we can afford. but hope to talk with them next week about the buy back offers.

[AngelinaCat]

Folks, you MUST break these long posts into paragraphs that people can read!

I do go in behind people and try to edit their posts into something that people can actually read now and again. But these last two are intolerable.

Please do something about this now, otherwise I will delete the post.

Thanks

[rjroyse]

I apologize.

[despritfreya]

I will take some responsibility for the 13000. when asked to list retirement accounts - since that is how I had it in my head

That explains why you needed to move it on Schedule B but. . . I believe it is up to the attny to verify the type of account. This is not an issue when dealing with a 401k but it is an issue when dealing with personal bank accounts. I normally require the client to bring in statements. I can tell you that more than once I looked at a statement (mutual funds are typical of this issue) and determined that the account, to my client’s surprise, was not a qualified retirement account.

And, yes, the funds collected by the Trustee will be utilized 1st to pay the trustee, 2nd to pay the trustee’s lawyer and 3rd to pay priority (tax) claims before it goes to anyone else. However, once the discharge is entered the taxing agencies do not have to wait for the Trustee to pay. They can go after you, assuming the taxes pass to you. In addition, the Trustee will not pay interest on the priority claim. What is owed on the day the case was filed is what the claim will be. Interest continues to run and will survive the bk along with any priority amount that is not paid. Lastly relating to this issue, you will need to make sure the taxing agencies file timely claims after your Trustee issues the Notice to File Claims. This should not be a problem for the IRS or AzDOR but, city taxing agencies are another story.

Do we simply give the items to the our attorney once they request them?

Depending upon who your Trustee is, he/she may have the auctioneer (Cunningham) come to take a look at the items. Or, he/she may ask you to send digital photos. Whatever process your Trustee chooses, he/she will be in touch with your attny.

And, by the way, you made the right choice not to put the entity into a bk. Entities do not get discharges in Chapter 7s. There are maybe two reasons to file a corporate 7 for a “mom & pop” business. . . 1) wanting the creditors to fight over the collateral and/or get a Trustee in place to collect receivables or 2) wanting to buy the assets of the entity free of the claims of the creditors. If an entity is dead and the owner has no interest in starting a new business of a similar nature, there is typically no reason to file bk for the entity.

Des.

[AngelinaCat]

Thanks Everyone. The posts are much easier to read now. Thanks