US Trustee Objected to my discharge

[Stressedout]

Gang, the US Trustee requested an additional 60 days to review my case and to decide whether to object to my discharge. The 60 days passed and the US Trustee is objecting to my discharge and there is a flag with the numbers 727. Has anyone experienced an objection to discharge by the US trustee? What type of case will I need to be in and is it in a private room or similar to the 341 meeting experience? Thank you.

[aachudneymiles]

sorry to hear this, do you have a lawyer? Maybe he could explain what that means and your next steps..sorry I couldnt be of help..

[Stressedout]

Yes I have a lawyer. She is working on it but in the meanwhile I would like to know what to expect.

[HHM]

The flag means that the trustee is seeking denial of discharge under section 727 of the BK code, however, section 727 has several sub-paragraphs. You need to actually pull the Motion the trustee filed to see specifically under what sub-paragraph the trustee is using to deny discharge.

[rfassett]

Just Monday my wife and I had a 2004 examination because the U S Trustee was trying to build a case to deny discharge under section 727. I talked with the UST's office (actually, the DOJ's office) prior to the meeting to ascertain what the issues were. I was told they were seeking a denial under Section 727(a) (2), (3), (4) and (5). This 2004 examination took place during the 60 day extention requested by the UST. Did you have a 2004 examination, or did they just fast forward to file a motion to dismiss? Our 2004 examination was conducted in a small meeting room at the Federal courthouse (but could have been done at the US Trustee's office) with a trial attorney with the DOJ conducting the inquisition and a court reporter doing the transcript. The whole thing was done under oath and took just over two hours. We are pro se.

[Stressedout]

I did not have a 2004 examination. They did a fast forward to file a motion to dismiss. I feel depressed because I have the same sections of the 727 for denial as you do and they all mean for the most part that we are lying or misrepresenting our assets or we destroyed or hid assets. None of which is even remotely true. Oh well, I hope she (my attorney) knows whats she's doing. Whats the absolute worst thing that could happen? No discharge? Can the judge refuse my discharge in a way allowing me to refile in the future?

[HHM]

I did not have a 2004 examination. They did a fast forward to file a motion to dismiss. I feel depressed because I have the same sections of the 727 for denial as you do and they all mean for the most part that we are lying or misrepresenting our assets or we destroyed or hid assets. None of which is even remotely true. Oh well, I hope she (my attorney) knows whats she's doing. Whats the absolute worst thing that could happen? No discharge? Can the judge refuse my discharge in a way allowing me to refile in the future?

You can't possibly have NO IDEA what the trustee is talking about. The motion would at least lay out the facts?

Why don't you fill us in on the back-story...and don't expect your attorney to save you. The attorney, assuming you told her everything up front, probably would have been in a position to give some advice and allow you to do some planning such that the motion would never have been filed in the first place.

[Stressedout]

Hi there. Yes, the motion did lay out the claims by the US trustee. I had a business involved and my attorney knew all of the information. He decided to file a personal chapter 7 rather then a business bankruptcy. He decided on this because the debt was personal debt used for the business. The more I think about, I believe he should of filed a busines bankruptcy rather then a personal bankruptcy. The lawyer clearly knew what a bulk of my debt was for and from as I laid it all on the line with her. From the claims of the US Trustee, she thinks that I am hiding assets and that I do not have enough assets to justify my debts. She also claims that there is no explanation as to where the money went. I believe they feel this way because they do know how much money was invested in the business. This whole thing is very scary to me. I hope my lawyer calls me soon but the problem is that she is on a mini vacation with her family.

Would I be able to refile as a Business Bankruptcy? My lawyer clearly knew but she still decided that the best way for us to file was a personal since the debt was personal debt used to fund the business. I am now second guessing her.

[HHM]

Ok

The personal vs business BK is not really an issue, business BK's are (at least business chapter 7) are pointless because businesses cannot receive a discharge. So in that respect, it does not matter that your attorney did not bankrupct your corp.

Still, you have not really filled in the back story, you had a business and the trustee thinks you are hiding assets from the BK estate, what assets are they complaining about? Is the business a separate legal entity or are you a sole-proprietor.

[Stressedout]

Its a Corporation. The US trustee is not complaining about any specific assets, just the fact of the lack of assets in relation to the debt load.

[rfassett]

Section 727(a)(2) has to do with intent of the debtor to hinder, delay, or defraud a creditor or an officer of the (bk) estate by transferring, removing, destroying, multilating or conceiling assets. (3) has to do with the same activity with debtor's records. (4) has to do with knowingly and fraudulently lying under oathe or making false claims. And (5) has to do with the debtor failing to explain satisfactorily, before determination of denial of discharge, any loss of assets or deficiency of assets to meet the debtor's liabilities.

Where do you fit in there? If I were you, I would be having a heart to heart with your attorney, but not before I boned up on what the issues might be and how I would propose to answer those issues.

This scenario is akin to what I tell folks that complain about their health insurance not allowing this that or the other thing. Ultimately, your health is your responsibilty - not the insurance company's and not your doctor's. And so it is in the present case, the outcome of your bankruptcy is ultimately your responsibility, not your attorney's. Get aggressive and get your attorney to file a motion objecting to the dismissal. You mentioned your attorney is on a mini vacation. If you can not talk to your attorney, ask the paralegal who is taking care of the attorney's emergency cases. And last time I was aware, Utah had telephone service. And I will bet your attorney has a cell phone to which the paralegal has the number. Call the paralegal and tell her that you want to hear back from the attorney by (set a realistic time). Get busy - and don't take "no" for answer.

The above is all predicated on your frim belief that you can beat the 727 charge. I went to my Rule 2004 with complete confidence that there was not any intentional malfeasance, and there certainly was not any fraud. The attorney doing the inquisition pointed out a question that I had answered incorrectly on the petition and that I had swore under oathe at the 341 meeting that the petition was correct. I explained to the attorney (convincingly I think) that first of all, I did not know that I had answered the question incorrectly. And swearing under oathe that the petition is correct only matters to the extent that I knew the answer was wrong - which I did not.

HHM mentioned that the personal vs business is a non-issue. In most cases that is correct. It is an issue for the U S Trustee. The Trustee will look for presumption of abuse under Section 702. But since 702 deals with consumer debt, if your preponderance of debt is not consumer debt, then according to the attorney at the 2004 meeting, the U S Trustee will give away 702 and look for dismissal under 727. As to your case with the Corporation, as HHM points out, Corporate chapter 7's do not qualify for discharge. A Chapter 7 bankruptcy of a corporation is a strict liquidation of all assets to pay the creditors.

[luckyinlove]

Where did the money go?

If you charged up $100K in debt in a year and have no assets where the heck did the money go? Seems to me that is the question, and I don't see an answer.

[Stressedout]

If you charged up $100K in debt in a year and have no assets where the heck did the money go? Seems to me that is the question, and I don't see an answer.

Hello. The debt is more then 1 year old. The debt was used to keep a failing business afloat. It was used as cash flow. I have basically nothing to show for it except for receipts which I do have. Thanks.

[HHM]

Ok...what type of business are we talking about here?

If you can document where all the money went, then you should have no problem with the objection. But, I would be concerned that the trustee simply went ahead and filed the motion to dismiss instead of simply asking for documents...something is not adding-up.

[southernbelle]

Wow, just reading this thread, I'm at a loss. I guess it seems as if there should be more assets for the amount of debt in such a short period of time. Just to give my example, I closed my business in July 2007, was in business since Feb 1999, and still have equipment in storage and receipts showing where everything else went.

I'm not interested in starting another business, but I'm paranoid the Trustee might assume I'm trying to conceal assets or defraud the court, so I took pictures of everything and made a list. It's just sitting in storage waiting for someone to take it away because I sure don't want it.

Stressedout, I surely hope it works out for you. I'll keep you in my prayers.