staying under trustee radar

[wooisme]

What is the best way to stay UNDER the trustee's radar once your plan is confirmed.

Also, if one has their own business (self employeed - 1099 schedule C on 1040) what does a person do if they notice that they may be making more money then claimed and do they consider your income before or after the business deductions....

any ideas at how they look at income increases when your self employed after your plan is confirmed while in the 13 plan.

[DeadManCrawling]

What state?

Your situation sounds very similar to mine.

I am also self employed, through my entirely self-owned S Corp.

Here's what my attorney has told me-which may apply in your case (or may not).

Company expenses will be looked at for a span of at least 2 years prior to filing. This is NOT an IRS exam, so company expenses will be considered legitimate if:

A) They are normal costs of operating your business, and typical to your industry. I know this is vague, but there IS room to move under this guideline. For instance, if you are considering new methods of advertising, or purchasing new equipment, it will be okay.

B) The money is spent BY THE COMPANY with the goal of making a profit. That is, you can do the above marketing or purchasing, but you CANNOT suddenly begin dumping 3k a month into an IRA. Now, if you have always paid into an IRA or similar fund, within guidelines by IRS, you can continue to do so in before-tax dollars to 3-5% of your pre-tax gross income.

C) The expense is reasonable. DON'T purchase brand spanking new cars in the company name with cash. If you need something like this, it must be REASONABLE, and you must be prepared to explain it.


To stay "under the radar":

We are in Florida, and intend to keep our home. After the BK we intend to sell it and use the equity to purchase a condo. We have about 100k in equity and can buy a condo for the same amount. This will increase our disposable income, which the trustee would be very interested in.

However, to stay "under the radar", our attorney advised us to keep the mortgage out of our CH 13 plan. Attorney says once the BK is over, we will be sending payments to the trustee. If our mortgage was in the CH 13 plan, the trustee woud instantly know if we moved.

Since it is NOT in the plan, it is something he won't know.

Attorney says he has had similar cases, where a debtor kept the mortgage out of the plan, then sold the home, moved to a smaller more affordable place, and NOT ONCE has the trustee bothered to check. End result=a far better situation for us, AND the trustee has a better chance of collecting ALL of the payment plans. Ours is a 5 year plan.

Do post more questions if you like. It osunds like we are in almost the exact same situation. I work from my home and make about 100k per year, with business expenes of about 40k per year.

He told us to figure our TOTAL income-from my business and my wife's real estate sales. Then figure TOTAL expenses, including IRS taxes, food, utilities, company expenses, the whole shebang.

It's ALL money IN, and all money OUT for us, with the magic number being about $300 per month in disposable. Yes, we will increase business spending where necessary to make this number appear. BUT the expense doesn't HAVE to continue after the BK.

In business, we have a little more room to move than a person who receives a check a week from a typical employer. We don't get many breaks as self-employed people, but this is DEFINITELY one we can (and should) avail ourselves of.

DMC

[Granny]

State definitely matters, and in our state, it matters which district ie which trustee.

Latest word from my attorney is our trustee is not interested in increases in income, they only look at the snap shot on the day of filing, so all I have to do is make my payments, make my normal house payments which are outside of the plan and avoid getting a large tax refund and I will stay under his radar.

BTW, we are also self employed with a C Corp, and they never asked to see any of the business records. I have a small Schedule C business out of my home that profits very little and they did want to see my income from that for filing but not after filing.

Last year our C corp revenue was 168K but our expenses (with payroll) was also about 168K. The business has always had a paper loss, due to depreciation. I guess this is one instance where I can be kinda happy about the increased fuel costs. At least it will reduce the profit, howeever, it won't just be on paper anymore, it has also been a hit to the bank account, hence the BK.

My question for you is this....are you fully utilitizing the business to deduct personal expenses that are business related, such as cell phone etc. so that you are paying for those things pre-tax?

[wrinkleigh]

We were an S corp -- but big difference in the way we operated. Hubby drew a paycheck every single week, for the same amount. We didnt take out any other money from the business for personal use.

Of course the business was not very profitable, hence, the reason I am here. , so I probably wouldnt listen to me for business advice.

We were never asked to prove our income -- course I'm not counting my chickens before they hatch either -- still have 4 days to go.

[wooisme]

Thanks for responding.

Yes, I claim cell, telephone, internet connection, advertising, office exp, office supplies, postage, the home office deduction which includes the electric, gas, part of the mortgage interest, part of the home insurance, and so on an so on. for instance last year before deductions i made $33,000 and after all the business deductions i made a profit of $3,200! so i was able to get it down quite a bit, have had this business since 1998 etc. so i utilize all the deductions that i can legally take with bankstatements showing amounts, checks, or receipts........

I guess my question is, do they consider the income AFTER you deduct the business expenses or before!

oh, i live in virginia

[DeadManCrawling]

It should be AFTER all business expenses. After all, in order to conduct business, you MUST spend on these items.

You say you made a $3,200 profit. If you also drew a salary or took "draws" or distributions in cash form, then these would also be defined as income.

Is the company your sole source of employment? If so, a "profit" of $3,200 would never stand up in court, and they would look at other items the company pays, such as phones, internet, reimbursements for the home office as "income" for BK purposes. This is what we are dealing with in our business right now-figuring out what portions of the company expenditures qualify as "income" for BK purposes.

If you are employed in a fulltime capacity at another job, outside the home, and this is "side" income, then you likely will be able to claim just the profit of $3,200.

You really, really need a good attorney in either case. He/she will know what is "allowable" or "typical" in your district. I cannot imagine filing Pro Se with a company involved. The main risks being if you calculate your income in a fashion the court deems unacceptable. They could determine that you have thousands of extra dollars per month by disallowing expenses like some you listed-even though they (to a business owner) are legitimate and necessary. That would result in an ungodly amount of money to pay creditors.

The other risk looming for us-and probably you-is that if you show too LITTLE income, you can be forced into a CH 7. In our case, that would mean selling some nonexempt company assets, and would put my family on the streets, homeless, because the company is our ONLY source of income.

Also, remember that while you are filing personal BK, the STOCK in your company (presumably owned by you) is an ASSET. The stock itself will become part of the BK estate and be valued as any other asset, like a car or house, whatever. This ASSET will be different though, as your company may (like ours) consist entirely of your personal talent and a few computers or specialty items. Our attorney is likely going to "value" our company at about 3k, the garage sale value of the equipment-since without me, there really IS no company. Its entire income (and mine) is based on my ability as an entertaining performer. Hence, without me, the company is essentially worthless.

I doubt I helped much, but I am trying. It's much more difficult with a business, but it also affords some room to move that most people don't have.

[wooisme]

No, i'm not a corporation, i'm just a sole proprietor, it's just "me", no employees, just me. the amount i made was $33,000 that was my income, i get a 1099 at the end of the year , i'm a subcontractor for another company that doesn't take out taxes but i do the work at home.

then my husband has a pension which is already included as income.

we are all past the hearings, etc. i basically just had a question regarding if i happened to make more money in my income would this be a problem or could this increase be written off as some kind of business expense.

[DeadManCrawling]

No, i'm not a corporation, i'm just a sole proprietor, it's just "me", no employees, just me. the amount i made was $33,000 that was my income, i get a 1099 at the end of the year , i'm a subcontractor for another company that doesn't take out taxes but i do the work at home.

then my husband has a pension which is already included as income.

we are all past the hearings, etc. i basically just had a question regarding if i happened to make more money in my income would this be a problem or could this increase be written off as some kind of business expense.

If you are past the hearings, and you make more money it will depend on the trustee. Has he asked you to give him all your tax returns during the plan? Financial statements in future years?

If so, you will need/want to "create" some expenses to account for the extra income. Got an IRA or 401k? Fund that. Increase the amount of space your business occupies in the home and pay a larger portion of business income toward your mortgage. More advertising, better equipment. Maybe a "business" trip to Vegas. Just make sure there is actually a good reason for going-there must be a real conference or tradeshow for you to justify the expense.

If he hasn't requested updates, I would not worry about it. Our attorney has been in this district for 19 years. He has never, not once, had a trustee request future tax returns or financial statements of any sort. He was flabbergasted when I shared some of the stories from here.

[aa06a47]

I'm told the best way to stay under the trustee radar is to make the payments to the trustee each and every month, on time, every time, plus make all payments to any secured debt you are paying outside the plan to avoid any "motions".

Face it, they have so many cases each year, they are not really staffed to look over your file more than once. I have heard that most people who get "caught" doing something they shouldn't do is because of someone (usually x-spouse) ratting you out. Also, I'm told some creditors from time to time will look for assets that were not claimed in the bankruptcy.

I would never advise anybody to do anything illegal, but if your planning on doing something a little out of the ordinary, I would tell no one, even close friends, because you never know who they might tell and well....you know the rest of the story. Face it, alot of us have good friends that don't understand filing bankruptcy...you just never know how they might react if you tell them your doing something shady.

[tofargone]

My trustee looks to be one that doesn't even have radar from what I have heard. Basically he hasn't asked for tax returns, pay changes, nothing. He also sent us a letter stating that unless our attorney quits we are not to contact him about anything, even then only if it means our payment will not be there.

At the 341 meetings all he would say to anybody is, " anything changed....looks like were getting money......I'll will recomend confirmation"

I asked my lawyer about raises and tax returns after and he said that in rare cases the trustee will ask for updated income information, but it was rare.

Hell I figure most of us 13r's have been hanging our heads for so long and dodging creditors that not raising the ire of a trustee can't be any harder

[lrprn]

My trustee looks to be one that doesn't even have radar from what I have heard. Basically he hasn't asked for tax returns, pay changes, nothing. He also sent us a letter stating that unless our attorney quits we are not to contact him about anything, even then only if it means our payment will not be there.

Sounds like you have the trustee all of us 13ers wish we had! Enjoy the less-stress Ch 13 - hope everything is going well for you so far.

[tofargone]

yea,

hopefully I'm not reposting in a couple of weeks because my attorney was wrong.

[tater71]

I so needed this post !! I've been searching the forum about taxes (we owe again this year) and then started seeing a lot of posts on ANY increase in disposable income goes to the trustee. Well, we've had a good year last year. We were both working and working good jobs. We are in month 31 of a 52 month plan (that's hard to write). Now we are back to one income (by choice). We did not disclose the increase in income to the trustee because our atty told us to have the "don't ask don't tell" attitude. If they don't ask for it, don't tell them. Our trustee (bk is in old law) doesn't ask for tax forms and said if the refund is over 2k (wish we could just get a refund), then they get how ever much over 2k. Plus if we're getting that much refund they wanted to go over our taxes to reduce the refund amount (??).

So for 31 months, we have paid every payment on time and the trustee has left us alone. Even with address changes and job changes, they haven't requested anything.

hopefully I'm not reposting either, tofargone !!

PS: filed in texas


lori

[Granny]

hopefully I'm not reposting either, tofargone !!

PS: filed in texas

lori

Tater,

Did you file in the Dallas district? If so, I believe we have the same trustee.

[tater71]

Granny, yes we're in Dallas. I guess we should count our blessing we have an un-involved trustee