The UST just got involved Please help

[aces67]

We went to our 341 and it went fine. We are below the median income to file a 7. The UST did NOT show up at our 341 and our attorney told us after the meeting that everything went fine and we'd be dishcarged in 60 days.

A few days later the trustee posted on Pacer stating basically that we have no assets and he wished to be discharged of duties. Things were looking good until today.

I got a letter from the bankruptcy court. It says:

The UST has reviewed the materials filed by the debtors and has determined that the debtor's case should be presumed to be an abuse under section 707(b).

What does this mean for us? What is 707 b?

I looked on Pacer today and the only other thing that has changed is our flags. We have a new flag that says Means Yes.

What do we next? I hate to get stuff like this on a weekend I have to worry over this now until Monday when I can call my lawyer.

Thanks for any advice.

[jadams]

707(b) deals with income and means test issues.

From the way I read it, it sounds like this would only happen if you are over the median and your means test didn't bring you down low enough to qualify for a 7. If it did, I would guess there was an objection to an expense you included.

How close were you to the median for your state and family size?

[aces67]

I just filled out a copy of the means test. In part III line 13 our annual income is $65930.76. On line 14 the median for us is $66400. On line 15 it says if line 13 is less than line 14 The Presumption Does NOT arise. Do not complete Parts IV, V, VI or VII.

Dh's income has dropped even more in since we filed in April.

I don't understand it at all. Our income is becoming less and less. What's the chances that our lawyer can fix this?

[aces67]

Okay I went completely through the means test. Here's what I came up with If I did it right.

As part our Ch 7 we are surrendering dh's truck with a note of $450.40 a month. I did the means test without that.

I came up with $535.70 a month in disposable income. If we were to keep dh's truck then our disposable income would be $85.30 .

The thing is I'm not sure the means test actually accounts for all our bills. On line 22A what does operating expenses include? We were only allowed $263 for that. We live way out in the country and we spend $350 per month just on the GAS for dh to drive to work that doesn't even include oil changes, trips to the grocery store or upkeep on the vehicle.

What do you guys think?

[justbroke]

I have been reviewing 11 USC 707(b) dismissal cases for the past couple of weeks. What the Trustee sees, under the totality of circumstances (11 USC 707 (b)(3)), is that if you didn't pay, in a hypothetical Chapter 13, for that truck anymore, then you do have the "means" to pay creditors at least the lessor of $10,000 or 25% of your total unsecured credit, over the term of a Chapter 13.

As for operating expenses, you can't (technically) use more than the IRS standard for that, and $253 sounds about right. The means test is an arbitrary amalgamation of random values utilized to compare you to a predetermined set of other imaginary numbers. Yes, I made that up, but that's about what it's worth.

The means test is the first "bright-line" test there is, in determining eligibility. The values are controlled and since you're under median, you get to put your actual expenses and income on the schedules (I/J). However, where they exceed the IRS standards, you use the standard, or prepare for a fight.

Hopefully you and your attorney will decide on how you will fight this. it's not insurmountable, and it reads to me like you may not have all your expenses on there. Having wrote that, the truck is significant, and not paying the truck does open up funds to pay through a Chapter 13.

You are being pushed into a Chapter 13, or you will have your case dismissed.

The totality of circumstances can by hard to overcome when you're surrendering property. Most people skate by and the Trustee never throws the 707(b) flag into the ring, but looks like s/he has done it in your case.

This is just my read.

[aces67]

So if dh's income has continued to drop would we be better off to let it dismiss and try again later?

Is it too late to keep the truck?

December and January were still good months at dh's job. That is gone now. The number they are using as our income on the Means is $5494. In actuality though since February he has grossed only $4500 a month or LESS every month

Thanks!

[indigoblue]

It sounds rather like my situation in that possibly you qualified for a 13 initally and then converted to a 7 due to lack of income and that raised a flag. If you still qualify for the 7 then it should be ok once the trustee looks at all the paperwork. They have to make a decision within 10 days of the 341 and that just allows them more time to review your case.

[downsized]

We're above the means test for a 7 if our last 6 months of income in used. We filed under "change of circumstance" because dh lost his job. Maybe something like that needs to happen in your case since your income was reduced. Or, if it's not too late, keep the truck and not reaffirming is hopefully an option to keep you below the means. Then, not reaffirming, you can walk away from the truck later if you need too.

[aces67]

We're above the means test for a 7 if our last 6 months of income in used. We filed under "change of circumstance" because dh lost his job. Maybe something like that needs to happen in your case since your income was reduced. Or, if it's not too late, keep the truck and not reaffirming is hopefully an option to keep you below the means. Then, not reaffirming, you can walk away from the truck later if you need too.

I'm hoping that's what we can do. I tried to tell my lawyer to begin with that without the truck payment we wouldn't pass the means but he assured me it would be fine.

[justbroke]

They have to make a decision within 10 days of the 341 and that just allows them more time to review your case.

Correct on a 707(b)(1) dismissal for abuse -- based on the means test.

As a refresher, the 707(b)(1) dismissal, is all about the means test and a "presumption of abuse". That dismissal must be noticed by the Trustee within 10 days of the 341 Meeting. The other standard, howevever, is the 707(b)(3) dismissal and that needs to be done within 60 days of the 341 Meeting of the Creditors (the discharge date). The 707(b)(3) dismissal is all about "bad faith" and "totality of circumstances" and really has nothing to do with the means test.

There was an excellent appellate case on this which actually overturned a lower court ruling that the Trustee didn't act fast enough. The 707(b)(3) objection is unique in this regard. It can be used as grounds for dismissal up until the last minute (before discharge).

So if dh's income has continued to drop would we be better off to let it dismiss and try again later?

I would re-run the means test with the lower number. That would be your grounds for a denial on the 707(b) dismissal motion by the UST. Since your expenses are still the same and your income decreased, this could really shut the UST up.

I'm hoping that's what we can do. I tried to tell my lawyer to begin with that without the truck payment we wouldn't pass the means but he assured me it would be fine.

Reads like your lawyer thought you would be okay, but the UST pulled the old 707(b) motion for dismissal. It's probably 11 USC 707(b)(3)(A) or 707(b)(3)(B) specifically that they are looking at.

I think many times it depends on who your UST is. Sometimes it makes no sense the things the UST fights over. How much unsecured debt are you dumping? Over $100K?

[jadams]

I just filled out a copy of the means test. In part III line 13 our annual income is $65930.76. On line 14 the median for us is $66400. On line 15 it says if line 13 is less than line 14 The Presumption Does NOT arise.

Now I'm confused.

This means you're under the median, doesn't it?

But then doesn't it not matter what your expenses are on your schedules?

Is it just because you're so close to the median? $500 over a year wouldn't be very hard to change, I suppose.

[justbroke]

Now I'm confused.

This means you're under the median, doesn't it?

But then doesn't it not matter what your expenses are on your schedules?

Is it just because you're so close to the median? $500 over a year wouldn't be very hard to change, I suppose.

The "means test" is not the end-all-be-all to being eligible for a Chapter 7! The BAPCPA kept the old "totality of circumstances" and "bad faith" hurdles in the Bankruptcy Code.

This means, that even an under-the-median can "pass" the means test but be ineligible for a discharge under Chapter 7 for other reasons.

The other reasons are the 707(b)(3) grounds for dismissal. It's still not really precedence across all the Districts, and the jury is still out, whether being under the median insulates you from the 707(b)(3) dismissal. The wording of the 707 paragraph is not clear at all and contains no "exclusions" or "exceptions" for under the median debtors.

[aces67]

Correct on a 707(b)(1) dismissal for abuse -- based on the means test.

As a refresher, the 707(b)(1) dismissal, is all about the means test and a "presumption of abuse". That dismissal must be noticed by the Trustee within 10 days of the 341 Meeting. The other standard, howevever, is the 707(b)(3) dismissal and that needs to be done within 60 days of the 341 Meeting of the Creditors (the discharge date). The 707(b)(3) dismissal is all about "bad faith" and "totality of circumstances" and really has nothing to do with the means test.

There was an excellent appellate case on this which actually overturned a lower court ruling that the Trustee didn't act fast enough. The 707(b)(3) objection is unique in this regard. It can be used as grounds for dismissal up until the last minute (before discharge).

I would re-run the means test with the lower number. That would be your grounds for a denial on the 707(b) dismissal motion by the UST. Since your expenses are still the same and your income decreased, this could really shut the UST up.

Reads like your lawyer thought you would be okay, but the UST pulled the old 707(b) motion for dismissal. It's probably 11 USC 707(b)(3)(A) or 707(b)(3)(B) specifically that they are looking at.

I think many times it depends on who your UST is. Sometimes it makes no sense the things the UST fights over. How much unsecured debt are you dumping? Over $100K?

We only have $25K in debt.

What do you mean by running the means test with the lower numbers? I know if I did that we would have no disposable income but he will only actually look at the higher number right b/c that is the true reflective income of the six months prior to filing. Correct or No?

[justbroke]

We only have $25K in debt.

Was just checking to be sure the UST wasn't interested because you had $100K+ of unsecured debt to discharge.

What do you mean by running the means test with the lower numbers?

I meant running the means test with the new numbers based on the reduction in income.

I know if I did that we would have no disposable income but he will only actually look at the higher number right b/c that is the true reflective income of the six months prior to filing. Correct or No?

True, but... since the UST pulled the 707(b) "trump" card, you get to say that your situation changed and that you income is less. Think of it this way... once the UST motioned to dismiss because of 707(b)(3) (bad faith or totality of circumstances), you get to say that the "circumstances" have changed. I think you're in a great position now!

Make sure you keep all those paystubs since you filed. I would make copies of them and have them ready for your attorney. I'm guessing, but I'm pretty sure that he'll be asking for them.

Best of luck!

[aces67]

So you do you think it's possible that this could still work out?

I have all the paystubs and they definitely show a steady decline in income.