100K limit? myth or real

[Priceless ProSe]

Well I recently filed chap 7 (pro se) and I have been reading alot on this forum about a "100k limit". The jist of it seems to be that once your debt reaches 100k the US trustee will scrutinize your case more. Is there any truth to this? Is this only unsecured debt?

For my wife and I we have approximately 50k in student loans (hers was expensive from a private school), 18k for a car (13k secured by the value of the car), and 43k in various other unsecured debt obtained over the last 8 years (27k of which were hers before we were married). This makes my total liabilities 111k, 98k of which is unsecured. Do you think this will draw alot of scrutiny?, or will the UST see that we have mostly just student loans and a car? Its not that im afraid of being scrutinized, we stopped using credit in 2007 and just recently filed, I just dont have the time to be tracking down all sorts of odd documentation for the UST. Plus im hoping (as we all do) that my case will be as quick and painless as possible (hehe).

I have not seen any such limit in BK code, but I would appreciate if anyone could shed some light on this.

[JRScott]

You can't discharge student loans in a bankruptcy.

However yes it is true that there is a certain threshold that brings the UST attention and probably a 100k or so will do it. This does not mean that you will not get a successful discharge just means he'll look over the paperwork a bit more closely.

[sunshine mary]

My attorney told us the UST was at our 341 because we were "borderline" a CH7 over the median she said nothing about the amount of debt we had but I have read that here too.

And to encourage you, even if they are there and you've been honest you probably won't have any trouble. We didn't and actually liked the UST more than the local one !!

[laurannm]

I've had lawyers during our consults tell me that 100k will bring the attention of the UST, but primarily they are looking to make sure you are not trying to hide assets or commit any kind of fraud.

[Priceless ProSe]

I understand that student loans cannot be discharged. My question is, if this 100k (or whatever it is) limit exists, is it for total liabilities (which would include almost anyone with a house), or only for unsecured debt? Do they include student loans in such an equation?

[lrprn]

My question is, if this 100k (or whatever it is) limit exists, is it for total liabilities (which would include almost anyone with a house), or only for unsecured debt? Do they include student loans in such an equation?

The $100K limit is just a loose guideline, not a rule and is certainly not a part of the bk law.

The $100K is a total of your non-secured debt, and yes, since student loans are considered non-secured debt when you file, those loan amounts are included.

Don't get freaked out here. The US Trustee just looks these cases with higher-than-normal non-secured debt totals over. If there's nothing in your filing that suggests fraud or questionable transfer or hiding of assets, nothing happens. Worry only if you file actually hiding something.

[Flamingo]

A very large debtload will almost surely be scrutinized due to the possibility of fraud prior to filing. All of us have seen postings by folks wanting to run out and purchase this and that hoping they can charge it all and then discharge it in BK. I have seen many postings over the years on various forums about people knowing they are going to file and charge big vacations on a credit card and then do not pay it. Things like that are what are looked for when there is a big run up of debt say in the year or so prior to filing. If one is honest as to everything when filing, there is nothing to worry about. Fraud is almost always caught anymore after the passage of the New BK Law in 2005.

[Priceless ProSe]

Thanks, makes me feel better. We stopped using all of our credit last year when things were obviously headed downhill. I didnt buy anything big but I have bought computers and such in the past (over a year ago). I guess I was worried because when I filled out all my forms our debt came to slightly over 98k (unsecured), and I was thinking OMG! I never realized we even had that much debt until I put it all out on paper. Before it was just 20 bucks a month to this card and 15 bucks a month to that card. Money flies when ur having fun I guess.

[Flamingo]

Thanks, makes me feel better. We stopped using all of our credit last year when things were obviously headed downhill. I didnt buy anything big but I have bought computers and such in the past (over a year ago). I guess I was worried because when I filled out all my forms our debt came to slightly over 98k (unsecured), and I was thinking OMG! I never realized we even had that much debt until I put it all out on paper. Before it was just 20 bucks a month to this card and 15 bucks a month to that card. Money flies when ur having fun I guess.

The two sentences I highlighted in your posting above is your flashing neon sign or "warning shot" that you need to take control of your finances or, as you have found out, they control you. As you state, it's a shock when you actually put it all on paper and realized how out of control it actually is.

[halloweendmb1]

If the UST looks at your case more clsoely what do they typically ask for?

[sunshine mary]

The UST asked me about some property I own and the value of it compared to what I owe and some questions on my pay stub like 401 withholding and insurance. That's all I remember.

[Help!]

I do know that the combination of a high unsecured debt load and above median income catches the UST's eye. The additional info. that the UST requested in our case was extensive - documenting every number in our petition with receipts, calcs., etc. We even had to provide copies of car titles, registrations, auto lease agreements, copies of all insurance policies (homeowner's/renter's/medical/auto) - the list of documents was six pages long. The stack, when we finally submitted it, was 347 pages. NOT FUN!

[Priceless ProSe]

WOW! 347 pages! given my current workload at school and my familial obligations I would most likely doo-doo in the envelope and send it back to them.

But then again we dont have property, a job (anymore), or anything of real value besides a car I am surrendering. SO I dont know how much they could actually ask me for.

I do have one question (probably should be a different thread), at what time do they normally ask for this documentation? According to PACER there have been no filings in my case since we filed originally, and its been a couple of weeks. Im not getting antsy, I just dont want them to drop a bomb on me and expect me to come up with 300 pages a week before my 341.

[laurannm]

I think in Help!'s case though (correct me if I am wrong, Help), it is standard practice in her district to essentially perform a detailed audit on all above-median debtors. From the experiences posted on these boards this is not the norm in most areas. I think it also depends on how far over the median you are. If you are significantly over, then the UST may want to see more documentation than usual (based on posts I've seen on these boards)

[Lajazz947]

OK, here's one for the boards advice on how a Trustee would scrutinize:

I fully expect to be scrutinized but I am ready. I took the means test many times and even plugging in higher income figures I seem to pass.

I would be willing to do a 13 if I had to since the discretionary income seems to be low even using higher income figures.

I want to state that I have absolutely NO FRAUD intent, no CC use ( well barely, less than $1500 ) in the past 6/7 months, no cash advances and serious attempts to pay creditors up until 2 months ago.

Well above the median income for California , about $130,000 in 2008, maybe more if things go right. 1099 so I pay my own taxes and have to save them monthly.

$220,000 in unsecured debt, no luxury purchases in 2006/2007/2008 , almost all of it for home remodeling.

Some cash advances in late 2006 but mostly for household expenses and robbing Peter to pay Paul.

All CC accounts closed now closed, voluntarily.

$700 per month in insurance premium, paid $6000 deductible this year already.

I have above average utilities with proof.

Very little in the bank now, one preferential payment for $40,000 to my associate in 3/08 who I owed money to with a promissory note drafted in late 2007.

Money came from my brother who owed me money.

Home worth about $800,000/maybe $850,000 depending on who you ask but I think $800,000 is more likely in this market.

Owe $763,000 1st and 2nd ($5600 a month mortgage)
$43,000 Mechanic's lien in litigation

Even at $850,000 the California exemption will take me very close with $75,000 exemption.

Three cars:

1 lease (upside down)
1 own but owe money on it to my associate (about even)
1 own (about $3000 worth )

Wife does not work outside the home, 2 small children, one adult child out of the house.

Sorry for the long post, I am WAY ahead of schedule.

My attorney has not even evaluated my case yet but I am just obsessing and trying to be as prepared as possible for my attorney, my 341 and the trustee.