5 months left in a 5 yr term and KABOOM!

[bvolvo]

Was told by the trustees office we need to pay them $15000 in addition to our regular payments!

I received a 20% raise in 2012 and a bonus. I addressed both of this with my atty. He said to wait and see on the raise (to see if the trustee "catches" it), but the bonus was addressed. I could keep it.

Fast forward to this year - Trustee gets our 2013 returns and flips out saying that we made way over the 10% threshold in 2012 and 2013 and we need to get new schedules in asap. They backed off of wanting 2012 returns, but wanted 2013 and 3 different sets for 2014! We got them all in, and our payment increased. Shocker (sarc). They came back to the atty saying we needed to come up with the difference. Stinks - but ok. All of this was from the 2012 raise that the atty never addresed (I have everything in email supporting this). When we got the email back from the trustee last Thurs, they had some other language in there about contributions. I have proven what we paid each year, but asked the atty what they meant. He said this was a basic CYA for the trustee. Then he thought 2nd and emailed the trustee. Come to find out what the trustee was referring to was that any difference we made in tithes to what we initially were approved for has to get back back to the court. Whattt??? For the past 4 years our contribution difference has to be paid back! To the tune of $7200!!

My question is this: Isn't it the attorney's job to be looking out for these things and saying "Hey you guys - did you know...?" I am ok if I owe something - I get it. But to come back over 4 years, with 5 months left in this thing, with no time to rearrange life to try to come up with this money? Is there some sort of negligence on this atty's part? Seems to me that there is. Now we cannot get him to return our emails. Someone please talk to me. This is scarey and we are angry.

[spidge]

I wonder if the judge would feel the same way as the trustee? I am willing to bet you could fight it with the judge, but I cannot tell you where to start. Hopefully someone who has some experience on the subject comes on to help.

[LadyInTheRed]

Spidge is right that if you don't agree to pay the extra cash, it is the judge who would have to decide if you should be required to do so. I have never heard of a retroactive modification of plan. But, if you were required to report your raises and didn't, I could see how the judge might agree with the trustee. The Oregon bankruptcy court has a form Order Confirming Plan that includes the following:

Unless waived by the trustee in writing, the debtor shall report immediately, upon receipt of notice of the change, to the
trustee if actual or projected gross annual income exceeds by more than 10% the gross income projected by the debtor
in the most recently filed Schedule I.

Was that language in the order confirming your plan? If so, I think your attorney should have advised you that your 20% raise must be reported to the trustee. On the other hand, if my attorney told me to wait to see if the trustee notices, I would put all of the extra money away in case the trustee does notice. Without knowing the exact exchanges between you and your attorney, it's hard to know if he is negligent. For now, I would focus on working with your attorney to resolve the current issues. If you want to consult with another attorney about your attorney's possible negligence, do that later. Right now, you need him as your advocate, not your adversary.

As spidge points out, if you don't agree with what the trustee is requesting, it is up to the judge to decide whether you should pay additional money.

Trustee gets our 2013 returns and flips out saying that we made way over the 10% threshold in 2012 and 2013 and we need to get new schedules in asap. They backed off of wanting 2012 returns, but wanted 2013 and 3 different sets for 2014! We got them all in, and our payment increased. Shocker (sarc). They came back to the atty saying we needed to come up with the difference. Stinks - but ok.

Who is "they". The trustee or the judge? Are you saying that in addition to increases in your future payment, you now have to retroactively pay the difference between your old payment and new payment since the beginning of 2013?

Come to find out what the trustee was referring to was that any difference we made in tithes to what we initially were approved for has to get back back to the court. Whattt??? For the past 4 years our contribution difference has to be paid back! To the tune of $7200!!

Is the $7200 in addition to the retroactive payments as a result of your raise? That doesn't sound right to me.

If the court has not ordered any lump sum payments for past years, you should call your attorney and ask what can be done to contest the retroactive payments.

[magic13]

Looking at your past entries dating back to 2010 if appears you have been communicating with both your Attorney and Trustee. Something doesn't appear accurate, this should not be a surprise, it appears the Trustee just doesn't trust you and he or she is digging. By the way, did you submit the new I and J form that was requested.

[justbroke]

Hopefully your attorney is up to the task. This is something that definitely needs to be fought with the Trustee. As LadyInTheRed wrote, it is not really a good thing to retroactively try to obtain past earnings (DMI?) from a debtor in the 9th inning (a baseball reference). If you truly had reported the increase and the Trustee had knowledge of the increase, then it is the Trustee's fault for not bringing it forward.

This is a good case to watch.

[bvolvo]

Thanks to all who have replied! FYI - I did report immediately to my attorney the 20% raise I received - same day as a matter of fact. I have had some action: My atty contacted his malpractice insurer, who has agree to pay half of the amount the trustee is requiring for retroactive income 2013-2014 ytd. I have hired another BK atty to overlook this case (the insurer is paying for this too), because the insurer is admitting fault of the atty - to a point. The challange before me now is that the trustee is ALSO requring us to pay the difference betweeen charitable contributions we were approved to give and what we actually gave. This amounts to $7200 over 4 YEARS. Why has the trustee not said anything till now? Why did my attorney, who gets a copy of my returns each year, never say anything? Please know that every step of the way I emailed our atty (EVERYTHING is in email - yay me!) whenever our income went up OR down. Whenever we had major house repairs that were also never given credit for in schedules. I went as far last year to send him a detailed email on what my concerns were with him never having refiled my schedules even after the increase. I also did something similar in 2012 when the increase first happened. He never refiled but kept saying "Let's see what the trustee says after he reviews the returns". I never knew reduced contributions had to be paid back and if I had know, I would have done something at that time. Perhaps it was told to us in the beginning, but with all this info it got lost somewhere. The "They" in my post is the trustees office. I guess I don't know what I could have done differently. Yes, we have saved some money - but not anywhere near this because of having to replace the siding and 2 kitchen appliances which the trustee knows nothing about because the atty said it would set the trustee off. As is was, the trustee thought line items in our new schedules were excessive. I can prove everything. Sigh...at least we received the offer that we did!

[justbroke]

To get around the "charitable contribution" issue, you would just need to show that it is still the same percentage of your gross earnings. In other words, if you earned $100K a year and your plan was confirmed with a $10K (10%) annual charitable deduction, any increase in earnings should have a corresponding increase in that contribution. So, if you went to $120K a year, your annual contribution should be $12K. If you totally went out of the norm and the percentage was higher, there could be... could be... some argument that you were only entitled to increase the charitable contribution by the same percentage growth.

These are things that are excellent for a bankruptcy attorney and a bankruptcy court to review.'

Someone should remind the trustee that you are not "approved" for certain expenses. Your case is confirmed based on a certain DMI and amount paid to the Trustee. If your income and your expenses increase then you file a new Plan and/or Schedule I/J. I don't know any court that would expect your expenses not to change in relation to your income.

Hopefully you didn't sign a settlement agreement. If the Trustee wins this argument, that your income can increase but your expenses may not increase, then I would still personally hold the attorney liable. That the insurance paid half only means what the insurer paid; the attorney could still have some liability for any amounts not paid by the insurer. That's my feelings if this was truly 100% the attorneys failure.

I guess the question is have YOU personally filed a claim with the malpractice insurer? (I outright admit not knowing anything about professional law E&O insurance, but I have E&O for my personal business and a $1,000,000 Professional Liability Bond (insurance) for work performed on behalf of my employer.)

[LadyInTheRed]

I'm glad to hear your attorney contacted his insurance carrier. Policies require that an attorney report to the insurance company as soon as they are aware of a potential claim. He is taking this seriously and following the rules. He is probably kicking himself. It was nice of him to try to save you money, but I bet he will give more conservative (and smarter) advice in the future.

I agree with JB that you should not sign a settlement agreement with your attorney or his insurance company until things are resolved with the trustee. According to the results of a Google search, the statute of limitations for a legal malpractice suit in Oregon is two years from the "injury".

Please keep us posted on how things go.

[justbroke]

Yes, definitely let us know how it goes. I too am glad that your attorney took responsibility. I hope this works out and that you don't risk losing your discharge because of a misunderstanding.

[magic13]

This is a scary case for chapter 13 filers. LITR and Justbroke have you ever heard of a case that the trustee waits until the end of a case and then requests money retroactively. Also asks the debtor to reverify confirmed expenses from three years earlier?

[justbroke]

This is a scary case for chapter 13 filers. LITR and Justbroke have you ever heard of a case that the trustee waits until the end of a case and then requests money retroactively. Also asks the debtor to reverify confirmed expenses from three years earlier?

Yes. In cases with similar facts. In the cases that I have seen, the debtor was required to submit annual tax returns (forms) but did not. The Trustee caught it late in the 60-month plan and when the returns were reviewed, the debtor earned significantly more money (more than 10-20%). The Trustee files a Motion to Modify Confirmed Plan in these cases.

Specifically to the amount of expenses, I would find it arguable, and a question for the Judge, as to whether an increase of income would allow a new expense calculation. I don't see why the Judge would not allow you to increase your charitable contributions or even 401(k) contributions at a rate consistent with the increase in your increase in income. What I think and what is allowed and customary in your District can be completely opposing ideas. I offer it just as my personal opinion.

There's actually a pretty good case out of Florida, In Re JOSE DELIZ-MEDINA and LOURDES VIGGIANO-DELIZ, Case No: 10-33888-LMI with an interesting twist. In this case, the Confirmed Plan only had language that read "if necessary" the Debtor should file tax returns! There was some confusion but the Debtor did at some point hand over tax returns. The Trustee scoffed and Motioned to Dismiss the case. The judge did not agree with the Trustee.

[LadyInTheRed]

There's actually a pretty good case out of Florida, In Re JOSE DELIZ-MEDINA and LOURDES VIGGIANO-DELIZ, Case No: 10-33888-LMI with an interesting twist. In this case, the Confirmed Plan only had language that read "if necessary" the Debtor should file tax returns! There was some confusion but the Debtor did at some point hand over tax returns. The Trustee scoffed and Motioned to Dismiss the case. The judge did not agree with the Trustee.

The plan in that case did require the debtor to submit tax returns. The "if necessary" related to the filing of an amended plan and Schedules I & J. The debtors did submit tax returns but did not file an amended plan or schedules I & J. The dispute was over when filing amended documents was necessary. The trustee argued that those filings were necessary when income increased. The judge disagreed and said that the modification was necessary only if the trustee requested the modification and amended schedules. At the time of the order, the trustee's motion to modify plan was pending. I wonder how that turned out.

bvolvo's case is different. If the confirmation order included the language from his local courts form order (I would assume it did, but bvolvo didn't confirm that), then it would have required the reporting to the trustee of any increase in income of 10% or more. Since the income increase was not reported to the trustee, the question is whether that allows the trustee to insist on a retroactive plan modification at this late date. Or, did the trustee have a duty to review the tax returns and notice the increase?

[LadyInTheRed]

This is a scary case for chapter 13 filers. LITR and Justbroke have you ever heard of a case that the trustee waits until the end of a case and then requests money retroactively. Also asks the debtor to reverify confirmed expenses from three years earlier?

I haven't, but I don't look at many Chap 13 cases.

I don't think any Chap 13 filer should be scared by this. But, they should take it as a precaution that they shouldn't completely rely on their attorney. We all must understand the process we are engaging in. The case that justbroke linked to talks about the Bankruptcy Code requirements to report information. The code requires that you report financial information when requested. Read the order approving your plan and any other documents provided to you by your attorney, the trustee and the court to make sure you understand what is required of you. If the order or any other document you receive says you must immediately report increases in income to the trustee and your attorney says "wait and see", push the attorney to report the increase to the trustee.

[LadyInTheRed]

I couldn't resist looking up the Florida case on Pacer. I only looked at the docket and not any of the documents. But, the debtor filed an amended Schedule I & J and modified plan after the court denied the trustee's order to dismiss. There was apparently some negotiation with the trustee before the modified plan was confirmed. The debtor is apparently having trouble making the modified payments. The trustee filed a notice of delinquency on 10/27. This is the second one in the year since the order the JB posted.

[justbroke]

LITR, the Florida case is an interesting case, and I was just trying to show that strange things happen and the Trustee is not always right. Many disputes should go to a hearing before the judge to figure out just who is correct. Of course you could always negotiate with the Trustee and hopefully come to a good resolution.

LITR, I can resist.