If Chapter 7 case is dismissed what can happen

[texanboy76]

A Chapter 13 doesn't mean you're paying unsecured creditors anything (by a simple look at the DMI on the Means Test). However, it's possible you could. This could happen by increases in salary, bonuses, or even tax refunds in the years you're required to be in Plan. As such... this is why they don't care that you're paying 0% to unsecured creditors. I'm in a 0% plan myself. However, any tax refund, would go to unsecured creditors, so there is the potential that they'd receive some dividend.

So I'm clear on this. Let's really say that my expenses are $10,900 and and income is $10,500 and that is no additional fluff just straight payments for mortgage and bills. Are you saying that can still put me in a Ch 13 even if there is no payment but then take my tax return money etc at the end of the year? If I'm truly upside down and show the exact dollars what options am I left with? My attorney told the court I couldn't fund a 13 and that is going to be proof when we fill out my schedules...

[DeadManCrawling]

As you said, your income and expenses will be somewhat of a moving target. Most trustees require that you report a change if it is over a certain percentage per year, like 10%. I imagine if your pay increased 9% each year, you would techincally not have to report. But if the trustee decided to check, there could be problems.

Same deal with expenses. A little is okay, a lot may be a problem.

Tough ground, under the trustee's thumb.

[DeadManCrawling]

So I'm clear on this. Let's really say that my expenses are $10,900 and and income is $10,500 and that is no additional fluff just straight payments for mortgage and bills. Are you saying that can still put me in a Ch 13 even if there is no payment but then take my tax return money etc at the end of the year? If I'm truly upside down and show the exact dollars what options am I left with? My attorney told the court I couldn't fund a 13 and that is going to be proof when we fill out my schedules...

Yes they can and usually do take tax returns. The return is excess income. You did not need it to live on, and it went unreported essentially. I would reduce the tax return numbers to the point where trustee is no longer interested, through deductions and dependents or lowering the withholding.

Of course, check with your attorney first. Every district has its own quirks.

[justbroke]

So I'm clear on this. Let's really say that my expenses are $10,900 and and income is $10,500 and that is no additional fluff just straight payments for mortgage and bills. Are you saying that can still put me in a Ch 13 even if there is no payment but then take my tax return money etc at the end of the year? If I'm truly upside down and show the exact dollars what options am I left with? My attorney told the court I couldn't fund a 13 and that is going to be proof when we fill out my schedules...

I don't know what the particular issue is, but there's something the UST doesn't like about your expenses. I can't tell you specifically what the problem is, but there is something.

Also, perhaps you should let the case just dismiss and wait until more income "rolls" off your 6-month lookback.

[texanboy76]

Yes they can and usually do take tax returns. The return is excess income. You did not need it to live on, and it went unreported essentially. I would reduce the tax return numbers to the point where trustee is no longer interested, through deductions and dependents or lowering the withholding.

Of course, check with your attorney first. Every district has its own quirks.

The reason my return is large is due to write offs (salvation army) 501 charitable contributions etc...The main issue is since I don't escrow my taxes then when I get my large return it's used to pay of property tax. It's basically a wash either way as it allows me greater flexibility throughout the year to not pay the taxes month to month.

[texanboy76]

I don't know what the particular issue is, but there's something the UST doesn't like about your expenses. I can't tell you specifically what the problem is, but there is something.

Also, perhaps you should let the case just dismiss and wait until more income "rolls" off your 6-month lookback.

The UST was claiming I lived a extravegant lifestyle with $450k home and nice cars although they were only $300 above the average..So the question is if my income is less then my true expenses (mortgage and bills) what will happen? If they look at my schedules and we show there is no disposable income am I screwed? To answer your question directly it was mostly predicated on how my debt was obtained and over what period of time. It's also based on where I live any my mortage payment with taxes included was around $4k

[DeadManCrawling]

Based on what you posted:

$300 x 2 cars over the exemption means $7,200 per year to unsecureds. Or about 36k over the CH 13 period. This may seem small to you, and indeed it did to me. Based on a simple deduction from your posts, I figure that I probably made about double, maybe triple, your income. I waited three years to file to let the excess income decline.

I must admit it sounds like the UST has valid objections in your current case.

If you are intent on a CH 7 I would suggest allowing the dismissal. Then I would reduce the taxable income to CH 7 levels, below median if possible, and refile.

If you are fine with a CH 13, I would be prepared to prove every expense, and probably add some, and hope for the best--which would be zero to unsecured.

I must say, after a fair amount of thought, it seems like you are trying to game the system and set the pieces in your favor.

I do not disagree with this method at all, but these things take a LOT of time and planning.

If you hope to wait out objections, but need to file soon, you are too late. I, in your shoes, would allow the dismissal, deal with the calls and a possible garnishment or three, and refile in a year. Just being honest. I know you have a family to consider, but you probably will run into serious problems whether it is a 7 or a 13.

Best to you,

-dmc

[justbroke]

The UST was claiming I lived a extravegant lifestyle with $450k home and nice cars although they were only $300 above the average..

The UST uses your $450K home value, just as a "look at the other facts". The UST cannot collaterally attack how much you pay for your home. There's a recent 9th Circuit ruling -- known as the McMansion case -- where the 9th Circuit basically stated that your home is necessary for the Debtor.

Now, as far as $300 average for each car... or even one car... you now have disposable income. Even if it's $300x60 ($18,000) or $600x60 ($36,000)... that can easily fund a Chapter 13.

So the question is if my income is less then my true expenses (mortgage and bills) what will happen? If they look at my schedules and we show there is no disposable income am I screwed? To answer your question directly it was mostly predicated on how my debt was obtained and over what period of time. It's also based on where I live any my mortage payment with taxes included was around $4k

There is no such things as "true" expenses in a Chapter 13. There are "allowed" expenses. When you go over any of the IRS-imposed limits, you either need a really good reason, or you need to contribute that amount of overage into the plan.

I don't think your mortgage payment has anything to do with the objection... except in the "totality of circumstances". But if not for your mortgage and then trying to claim cars $300 over the limit... you could fund a Chapter 13. You, the Debtor, are choosing to live extravagantly even though you can't afford to.

I hope that makes sense to you, and you can see not only the UST and Judge's viewpoint, but understand what DeadManCrawling and I just posted.

[backtoschool]

The UST was claiming I lived a extravegant lifestyle with $450k home and nice cars although they were only $300 above the average..So the question is if my income is less then my true expenses (mortgage and bills) what will happen? If they look at my schedules and we show there is no disposable income am I screwed? To answer your question directly it was mostly predicated on how my debt was obtained and over what period of time. It's also based on where I live any my mortage payment with taxes included was around $4k

As Justbroke and DMC have said, $300 over the limit for the cars is enough to fund a chapter 13 plan.

If your mortgage payment is really high, US Trustees will often use that as well to kick you into a chapter 13, stating that if you had a more affordable house, you could pay your creditors.

If the UST can come up with $180 a month or more to fund a chapter 13 plan, then they will put you in a chapter 13.

[justbroke]

If your mortgage payment is really high, US Trustees will often use that as well to kick you into a chapter 13, stating that if you had a more affordable house, you could pay your creditors.

Mortgage payments actually have an affirmative offense. The Code and IRS do not limit payments related to housing. However, being over the limit for a car, does not have any affirmative offense. There is a defense when the car is necessary for medical reasons.

Now, I'll add that the UST will use the high mortgage payment as well as the other things you're keeping, in their overall "totality of circumstances" argument to show that you want to have your cake and eat it too. Absent the other service on secured debts, the UST can not collaterally attack a mortgage payment... although many have done so. I'm glad that in recent attempts to claim (just) the mortgage payment as being extravagant, the USTs have lost.

[backtoschool]

Mortgage payments actually have an affirmative offense. The Code and IRS do not limit payments related to housing. However, being over the limit for a car, does not have any affirmative offense. There is a defense when the car is necessary for medical reasons.

Now, I'll add that the UST will use the high mortgage payment as well as the other things you're keeping, in their overall "totality of circumstances" argument to show that you want to have your cake and eat it too. Absent the other service on secured debts, the UST can not collaterally attack a mortgage payment... although many have done so. I'm glad that in recent attempts to claim (just) the mortgage payment as being extravagant, the USTs have lost.

I agree with you Justbroke, that USTs should not have the ability to force someone out of their house just to fund a 13.

But they certainly have tried, and they use "totality of circumstances" to try to get the debtor into a lower house payments so that they can free up money to fund a 13.

I am glad that they are beginning to lose in this trend.

[Clouddancer]

amazing how they reported on the findings. First my pay decreased and they aren't going to re-instate the reduction in pay.I also said that Bonus payments were suspended until June 2010. Bonus can be a moving target and is hard to guage on what you will get. So in a 13 a trustee can monitor all your expenses and adjust accordingly?

Which BK district?