Lawyer warns of presumption of abuse due to assets even though we're under median

[lulabelle]

It's like the saga that never ends.

We had our meeting w/attorney today. He is pushing for us to file Ch 13 even though we are $13,000 under the median. He warned us that the trustee would scrutinize us more closely because he calculated we would have $10,000 in non-exempt assets. We asked if we could still file Ch 7 and offer a buy-back option on the assets. He still thinks that the trustee would still push us into a 13 because we have a high income.

Does being $13,000 under the median mean nothing? We are a family of 6 and when I went through our budget numbers I don't see where there is money to fund a 13. He not only wants to put us into a 13, but a 5 year 13 because the payments in a 3 year plan would be so high.....so, in other words, he knows we can't afford a 3 year plan, but he still says we'd have to be able to pay back the amount of the non-exempt assets.

I am so confused on where to go from here. He has scared us now even though I was hoping it was cut & dry since we were under the median.

Our non-exempt assets include some firearms, camera equipment an ATV and some other items. Mostly it's a lot of older items that when you add them all up, equal a high amount.

So now either I continue to push for the 7 and possibly lose a couple of thousand dollars if they dismiss our case and have to file a 13, or I take a 13, five year plan with a dollar amount I'm not sure we can afford.

I hate this.

[browneyes]

Are you using the federal exemptions? They are the most generous as if you have no home equity, you basically have about 11,000 each in a wildcard.

[lulabelle]

We are using state exemptions right now, assuming that we have too much equity in the house. We are having a realtor come out to give us a market analysis though.

[BnkrptcyLwyr]

It's like the saga that never ends.

We had our meeting w/attorney today. He is pushing for us to file Ch 13 even though we are $13,000 under the median. He warned us that the trustee would scrutinize us more closely because he calculated we would have $10,000 in non-exempt assets. We asked if we could still file Ch 7 and offer a buy-back option on the assets. He still thinks that the trustee would still push us into a 13 because we have a high income.

Does being $13,000 under the median mean nothing? We are a family of 6 and when I went through our budget numbers I don't see where there is money to fund a 13. He not only wants to put us into a 13, but a 5 year 13 because the payments in a 3 year plan would be so high.....so, in other words, he knows we can't afford a 3 year plan, but he still says we'd have to be able to pay back the amount of the non-exempt assets.

I am so confused on where to go from here. He has scared us now even though I was hoping it was cut & dry since we were under the median.

Our non-exempt assets include some firearms, camera equipment an ATV and some other items. Mostly it's a lot of older items that when you add them all up, equal a high amount.

So now either I continue to push for the 7 and possibly lose a couple of thousand dollars if they dismiss our case and have to file a 13, or I take a 13, five year plan with a dollar amount I'm not sure we can afford.

I hate this.

I think you are misunderstanding ...

The reason to do a 13 when there are assets is so that you can keep the assets, and make at least the equivalent payments. In other words, if there is 10k in non-exempt stuff in a Ch. 7, then the Ch. 13 payments to unsecured creditors must total at least the 10k that would be non-exempt in the Ch. 7. Basically, unsecured creditors in a Ch. 13 have to receive at least as much as they would receive in a Ch. 7 (they can't do any worse than that).

If you don't care about the stuff, and are willing to turn over the non-exempt assets, then stick with the 7. Or, you can make an offer - tell the Trustee I will give you 5k in cash, or you can take the 10k in stuff - a lot of times, they'll take the cash and say have a nice day (they don't want to have to waste time selling stuff, accounting for it all ... just give em a check and they're happy ... you can strike a really decent deal in most cases.)

The Trustee will not "force" you into a Chapter 13 ... in fact, if you are below median they cannot force you into a Chapter 13 because they cannot seek dismissal of your case. Well, the US Trustee and the Court could, but that would be so unlikely I couldn't even begin to imagine it.

[lulabelle]

Thanks for the response! Yep, I do understand that the 13 payment must be at least equal to the non-exempt assets. The attorney told us that even if we offered to buy the non-exempt assets back, the trustee could still refuse our offer and dismiss our case due to presumption of abuse (having a high income, even though we are legitimately below median and have large expenses being a family of 6), forcing us to file 13 instead. I don't want to pay thousands in attorney's fees up front and have it end up like that.

The other thing I don't understand, and maybe someone can help me understand it - when I calculate our non-exempt assets + our vehicle cramdown + attorney fees + trustee fees and divide it by 60, it doesn't equal the monthly payment he is proposing. It's off by $115 a month. Where does the other $115 go?

I just can't imagine that the trustee would want to waste his time with some of our piddly junk. I could see if we had a nice boat or motor home that was an easy sell for him, but we're talking a garage full of 15+ year old tools and stuff like that.

[NoTomatoCan]

I am curious - how did you value your stuff?

If it is old junk, how come it is adding up to so much?

Or to put it another way - are you possibly over valuing your stuff?

[lulabelle]

I am curious - how did you value your stuff?

If it is old junk, how come it is adding up to so much?

Or to put it another way - are you possibly over valuing your stuff?

Good question - some things do have some value - photography equipment is just over $1000 (it's all fairly new), the ATV is a few thousand, but the rest is just a lot of older "stuff" (hobby things, etc.) that when added all together happens to equal a decent amount. It's nothing special, just lots of it. We worked hard to value our things - looking up things on eBay/Craigslist, etc. and even the attorney thought we definitely didn't overvalue.

[DebtEnder]

The panel TT, the guy you will see at your 341, is not concerned with your income. Only your assets. Anything you have as a single item worth a thousand or so is something he WILL be interested. Small things that add up to a decent item will probally not be of concern to him. So in your case a 1k camera and the ATV if not exempted would be things you might have to give up, or try to redeem(buyback) from the TT.

If the photo stuff is for a bussiness you might be able to do a tools of the trade exemption. Depends on the state. If it just for a hobby you can't use tools of the trade

The US TRUSTEE is the one who seeks to convert people into a ch13 or outright dismiss if the filing is abusive. With a large household and being under median odds are good the UST will not even open your casefile. Have you talked with more then one BK lawyer? If not I would seek out other advice.

I would think it would be cheaper to redeem the items in a 7 then pay them back in a 13. Even if the TT does not take your redeem offer you can always bid on the stuff yourself at auction and there's nothing stopping you from getting it back that way.

[BobMango]

If you are under the median and legitimately have a negative DMI I don't see how having excess assets pushes you into a 13.

I was just under the median, family of 5, and had a slightly positive DMI ($25). We had about $7K in assets we couldn't exempt. The trustee abandoned the assets. Did not even ask us to pay anything to keep them. We were prepared to let him have those assets in either case.

Part of his issue was that we were able to partially exempt those assets, meaning that the trustee would have had to pay us the exemption amount and then take the risk of selling the assets.

I think your attorney may just be a little gun shy.

[StartingOver08]

If you are UNDER MEDIAN income for your family size of 6, then I don't understand where the attorney says that the Trustee can push you into a 13 because of income!

Find another attorney. This one is not your advocate. It does not even sound like he knows what he is doing with your BK. He does get paid more to file a Ch 13 so he may be thinking about his own pocket rather than your case, but find someone that is experienced. In fact interview several more attorney's. IMO I would not use this one.

[Depressed]

Find another attorney, this one's just trying to make more money.

[lulabelle]

If you are UNDER MEDIAN income for your family size of 6, then I don't understand where the attorney says that the Trustee can push you into a 13 because of income!

Find another attorney. This one is not your advocate. It does not even sound like he knows what he is doing with your BK. He does get paid more to file a Ch 13 so he may be thinking about his own pocket rather than your case, but find someone that is experienced. In fact interview several more attorney's. IMO I would not use this one.

This is exactly how we're feeling right now - like he's not advocating for us. I've read so many posts on this board from people whose attorney's sit down with them and work on their expenses & assets to make sure they're getting what best benefits them. Ours only just today admitted that we could look at spending down our cash on hand in order to reduce our non-exempt assets. Why would you have your client walk into a 13 with more than $100 cash on hand, non-exempt? I asked him about it a month ago and he told me not to worry about it because you don't lose any assets in a 13......yes, but that adds to the amount we have to pay throughout the 13!

We really needed to file this month - I cringe at the thought of having to attorney shop again; especially since we've already paid this one a deposit.

[justbroke]

I don't think the answer is so simple. The debtor (original poster) probably has assets they want to keep and can't afford to "buy" them from the Trustee. There are reasons to go into a Chapter 13 when you're trying to keep property.

So the only thing I'd suggest to lulabelle is to tell your Attorney that you'll allow the Trustee to sell the "firearms, camera equipment an ATV and some other items". Since you don't have exemptions for them and can't afford to buy them from the Trustee.

Remember, the Chapter 13 would be so that you could "buy" those things back. If they are "old" and you don't want to risk a Chapter 7, then give them up. If your attorney still insists, after you tell him that you'll give up all the non-exempt items, then you should insist that he files a Chapter 7. For some reason, I'm thinking you told your attorney that you want to keep those "firearms, camera equipment an ATV and some other items".