I am so relieved. My story began 5.5 years ago with a trustee’s audit, a ‘Presumption of Abuse’ and a Dept. of Justice Audit thanks to an inexperienced BK lawyer. It’s a long read but I can’t imagine anyone going through this gauntlet again so I chose to share the major lessons I learned from start to finish:
Two years into the great recession the floor appeared to be giving way underneath me while the banks where squeezing me by hiking interest rates and monthly payments. I retained a local attorney who advised me to file Chapter 7.
LESSON #1: Seek out an experienced attorney. Mine wasn’t - otherwise he would have known not to try for a Chapter 7 given my income – causing a lot of needless time (5 mos.) and a grueling audit.
LESSON #2: Your Employer will find out you filed for BK if a.) you have a 401K loan outstanding or b.) you have your wages garnished from your paycheck. Regarding a): I wasn’t including my 401K loan in my BK but I was required to list them as a debt. Didn’t matter. Work received the BK notice anyway via the benefits group handling our 401K plan. Regarding b): My district permits auto-debit from checking in lieu of wage garnishment so this wasn’t bad.
LESSON #3: Avoiding panic at the 314 hearing
At my Chapter 7’s 314 hearing, a 2nd trustee appeared in front of the crowded room and I was called into a separate, private room with my lawyer and had to do a Q&A session. It was really just an in depth examination to all that I had submitted in the BK paperwork. Assets, expenses, who shared my household (and their contributions), my work, my income, etc. Just be prepared to be honest and don’t panic.
LESSON #4: Surviving a Dept. of Justice AUDIT (and I mean FULL AUDIT)
Within a couple weeks of the 341 hearing, my lawyer received the official notice that I was going to have to undergo a Department of Justice audit. It happens sometimes he claimed. “Why me?” Well, over the next 10 days or so I had to supply all types of bank records, deeds, car notes, W-2’s and various bank records going back a half a year and in a couple instances they wanted three year’s worth of docs – like my tax returns. It was a huge shuttling of paperwork.
LESSON #5: When the Trustee files a ‘Presumption of Abuse’
It didn’t take long afterwards that my lawyer received notice that the trustee had filed a ‘Presumption of Abuse’ in my case which essentially means I didn’t quality for a Chapter 7 because I still had too much income and that I’d have to do a Chapter 13 instead. Five months after my initial Ch. 7 filing, my case was converted to Ch. 13. Had my attorney been more experienced, I truly believe I could have been spared these 5 months of being hounded by the DOJ. I was, essentially, over-funded for a Ch. 7.
LESSON #6: During a Chapter 13
Make sure payments are made on time and (when required) all your Federal tax refund checks get to the trustee. Mine lasted 60 months and in retrospect, I can’t believe (now) how quickly it went by. Essentially, keep your nose clean. A word on CREDIT CARDS: My court district allows no more than $500 in new debt ‘except for that which is needed for work or business’. I travel and run through about $1,500 in expenses each month for work. The biggest hurt was going from $200K in available credit lines to $700 after my filing. Credit One (a terrible card but it worked when I needed it most) gave me two increases during my 5 years. Somewhere around year 3, BarclayCard sent me an unsolicited offer which I accepted. These guys have been the best card (even pre-BK) that I think I have ever had. Generous credit lines (especially given my FICO 630) and NO monthly fees.
LESSON #7: LAST PAYMENT MADE – NOW WHAT
You need to be on Pacer. I received the Trustee’s notice that the audit was completed and ‘Closed’ about 7 weeks after my last payment. 7 days went by and still no Discharge. I called my lawyer (the same one) and asked what the time frame was. His reply is that he thought the discharge had already happened. Pacer only showed a ‘Closed’ status – not a ‘Discharge’. He called the BK Court Clerk. Some of the Trustee’s paperwork from 7 days earlier was never entered into Pacer. My lawyer faxed his copy to the clerk and within 2 hours Pacer was updated to “DISCHARGED”. Lesson: Be aware of what is happening on Pacer.
Don’t be afraid. Take control of your life. Or someone else will.
Two years into the great recession the floor appeared to be giving way underneath me while the banks where squeezing me by hiking interest rates and monthly payments. I retained a local attorney who advised me to file Chapter 7.
LESSON #1: Seek out an experienced attorney. Mine wasn’t - otherwise he would have known not to try for a Chapter 7 given my income – causing a lot of needless time (5 mos.) and a grueling audit.
LESSON #2: Your Employer will find out you filed for BK if a.) you have a 401K loan outstanding or b.) you have your wages garnished from your paycheck. Regarding a): I wasn’t including my 401K loan in my BK but I was required to list them as a debt. Didn’t matter. Work received the BK notice anyway via the benefits group handling our 401K plan. Regarding b): My district permits auto-debit from checking in lieu of wage garnishment so this wasn’t bad.
LESSON #3: Avoiding panic at the 314 hearing
At my Chapter 7’s 314 hearing, a 2nd trustee appeared in front of the crowded room and I was called into a separate, private room with my lawyer and had to do a Q&A session. It was really just an in depth examination to all that I had submitted in the BK paperwork. Assets, expenses, who shared my household (and their contributions), my work, my income, etc. Just be prepared to be honest and don’t panic.
LESSON #4: Surviving a Dept. of Justice AUDIT (and I mean FULL AUDIT)
Within a couple weeks of the 341 hearing, my lawyer received the official notice that I was going to have to undergo a Department of Justice audit. It happens sometimes he claimed. “Why me?” Well, over the next 10 days or so I had to supply all types of bank records, deeds, car notes, W-2’s and various bank records going back a half a year and in a couple instances they wanted three year’s worth of docs – like my tax returns. It was a huge shuttling of paperwork.
LESSON #5: When the Trustee files a ‘Presumption of Abuse’
It didn’t take long afterwards that my lawyer received notice that the trustee had filed a ‘Presumption of Abuse’ in my case which essentially means I didn’t quality for a Chapter 7 because I still had too much income and that I’d have to do a Chapter 13 instead. Five months after my initial Ch. 7 filing, my case was converted to Ch. 13. Had my attorney been more experienced, I truly believe I could have been spared these 5 months of being hounded by the DOJ. I was, essentially, over-funded for a Ch. 7.
LESSON #6: During a Chapter 13
Make sure payments are made on time and (when required) all your Federal tax refund checks get to the trustee. Mine lasted 60 months and in retrospect, I can’t believe (now) how quickly it went by. Essentially, keep your nose clean. A word on CREDIT CARDS: My court district allows no more than $500 in new debt ‘except for that which is needed for work or business’. I travel and run through about $1,500 in expenses each month for work. The biggest hurt was going from $200K in available credit lines to $700 after my filing. Credit One (a terrible card but it worked when I needed it most) gave me two increases during my 5 years. Somewhere around year 3, BarclayCard sent me an unsolicited offer which I accepted. These guys have been the best card (even pre-BK) that I think I have ever had. Generous credit lines (especially given my FICO 630) and NO monthly fees.
LESSON #7: LAST PAYMENT MADE – NOW WHAT
You need to be on Pacer. I received the Trustee’s notice that the audit was completed and ‘Closed’ about 7 weeks after my last payment. 7 days went by and still no Discharge. I called my lawyer (the same one) and asked what the time frame was. His reply is that he thought the discharge had already happened. Pacer only showed a ‘Closed’ status – not a ‘Discharge’. He called the BK Court Clerk. Some of the Trustee’s paperwork from 7 days earlier was never entered into Pacer. My lawyer faxed his copy to the clerk and within 2 hours Pacer was updated to “DISCHARGED”. Lesson: Be aware of what is happening on Pacer.
Don’t be afraid. Take control of your life. Or someone else will.
Bankruptcy Wizard
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