Can Not Reaffirming lead to a 13?

[Frshstart09]

Perhaps I'm just getting the pre-341 jitters. I'd appreciate if anyone has had experience with the following:

I'm 20K over median for household.
My schedule J has me -145 a month
I have two vehicle payments 460 and 441 (vehicles I'm glad to surrender to have a fresh start)

These are my questions:
My lawyer says I don't have to make a decision about my vehicles for another 45 days or so...however...

--My statement of intention states that I plan on keeping the vehicles.
-? If I decide not to reaffirm after the 341, will the court view those two payments as disposable income? (Me and my spouse will still need vehicles to get to work)

--Both loans will be 60 days behind because I missed the first payment when I filed (due to attorney fees) and I'm holding the second because I'm not sure If I'll need a beater car.
?Because I have fallen behind on payments, is a ride through on those loans now not possible?

Basically I'm worried that I'll have to keep two expensive vehicles to be able to file for Chapter 7. I'd much rather start off right with something I can afford. Has anyone had a similar situation? Am I off base? Thanks!

[justbroke]

Not to scare you, but Trustees are pulling the 707(b) Dismissal flag these days, and specifically for over median (and near median) filers. The thing is, that it's okay to list payments for secured property that you will be surrendering in your Chapter 7. However, the Trustee can't questions your means test, but the U.S. Trustee (UST) can question your right to a discharge under the totality of circumstances.

This is where the UST notices the court that they have a 707(b) objection and file for Dismissal on those grounds. Basically, they will claim that if you are not keeping the vehicles, then you have $901 (according to your number above) to contribute towards unsecured creditors. It's that simple.

If you are "lucky", then the UST would not even notice and you won't get the 707(b) dismissal.

[Frshstart09]

Yikes...thanks for the heads up. I would have thought it would factor in. I guess that the UST wouldn't really take into consideration that I would have to replace the vehicles, albeit cheaper alternatives. Hmph. Thanks again.

[Rick9972]

What is being said about this topic and what is allowed for this is directly related to which Court of Appeals you are in.

For example the 9th Circuit allows surrendered property payments to be counted in a Totalaity of Circumstances, The Sixth Cir does not. But on surrendered vehicles or homes, the Sixth allows the standard IRS amount to included.


What I am saying, The answer for this subject really depends on which Circuit you are in.

[Frshstart09]

Thanks Rick. I guess I need to school myself of this Totality of Circumstance. I guess I'm in the 9th circuit. I'm not clear if this is a good or bad thing in my situation. I'll do some more research.

[justbroke]

For example the 9th Circuit allows surrendered property payments to be counted in a Totalaity of Circumstances, The Sixth Cir does not. But on surrendered vehicles or homes, the Sixth allows the standard IRS amount to included.

The 9th Circuit recently ruled this year that (In Re: Baeza), that the resultant "disposable monthly income" (DMI) from surrendering property in a Chapter 7, can be a basis for a 707(b)(3) dismissal.

What I am saying, The answer for this subject really depends on which Circuit you are in.

The Circuits seem to be closing ranks on this one.

Ref: In re Baeza, 2008 WL 5411118 (Bkrcy, E.D. Cal. Dec. 2008, Lee. J.)

[Frshstart09]

Thanks JustBroke and Rick. Looks like i'll be reaffirming/keeping my vehicles. Wouldn't want to shoot myself in the foot.

[JRScott]

What you could do is not reaffirm and continue making payments until after discharge and closing. Then walk away depending on what your court allows I don't think they'd reopen the case .

[Rick9972]

[albacore44]

Alright, so exactly what does all this mean. If you file for Ch-7, have 2 car payments that are at/or below the allowable IRS guidelines, and you intend to keep the cars, but do a ride through keeping current on the payments, that the UST can invoke 707b to disallow the car payments to force you into a Ch-13 because they think you should be in a Ch-13 ?? Boy i hope not

[justbroke]

albacore, you won't have a problem in that situation. The question is how are the Courts treating debtors who are actually surrendering (Statement of Intentions and actual Surrendering) property in a Chapter 7, yet claiming the payments on their Means Test. It has pretty much been settled that a person can claim future payments for debt on property that they are surrendering, in the means test (there are a few Districts not accepting this fact). However, the Trustee then pulls the old "totality of circumstances" on you and uses the "Hypothetical Chapter 13" strategy to say that you could afford to pay something to unsecured creditors, because you won't have the payments anymore.

Again, albacore, in your situation, you'd be okay. Had you decided to "surrender" those vehicles, the Trustee "may" force you into a Chapter 13.

[justbroke]

I don't think they need to reconcile these any of these rulings. Kagenveama, in my reading was about whether "projected" disposable income was a mechanical calculation of simply multiplying "disposable monthly income" (DMI) by the applicable commitment period or by "looking forward" to your actual/expected DMI.

[albacore44]

albacore, you won't have a problem in that situation. The question is how are the Courts treating debtors who are actually surrendering (Statement of Intentions and actual Surrendering) property in a Chapter 7, yet claiming the payments on their Means Test. It has pretty much been settled that a person can claim future payments for debt on property that they are surrendering, in the means test (there are a few Districts not accepting this fact). However, the Trustee then pulls the old "totality of circumstances" on you and uses the "Hypothetical Chapter 13" strategy to say that you could afford to pay something to unsecured creditors, because you won't have the payments anymore.

Again, albacore, in your situation, you'd be okay. Had you decided to "surrender" those vehicles, the Trustee "may" force you into a Chapter 13.

Good since its actually part of my strategy to keep out of a Ch-13. yes, i have very high unsecured above $100k, but due to reduction in income, when I file I will be slightly over median for ca. but mortgage expenses are high + utilities are over IRS guidelines. I anticipate a fight with the UST like some others here, but i have documentation and am spending this time before filing preparing for anything they can throw at me. I think some of the others that dealt with the UST filed a bit too soon. this is a great site, and if you learn anything, it's the importance to plan.

[Frshstart09]

Thanks everyone! My petition is to retain both vehicles. I need to scrape money together to get current before discharge. Appreciate all the input.