Ch.7 dismissed due to "abuse" AND "totality of circumstances"

[Liore1477]

My Ch.7 case was dismissed today due to "abuse" AND "totality of circumstances" at the same time. Basically, the UST did not like the fact that there are two $40K vehicles leased in the family and the total gross income is $175K. Notwithstanding the fact that expenses far outweigh the income (hence the reason for filing), UST wrote that certain expenses are unnecessary. Specifically, she questioned parental support (buying them groceries, meds and household items) and child education (music lessons).

My first question is how difficult would it be to convince the judge in the bankruptcy court that these are reasonable and necessary expenses? Is there such a thing as bias against people making more than $100K no matter what their debt level and expense structure are?

UST wrote that even if we rebut the "abuse" provision, they will invoke the "totality of circumstances". My second question is - does this mean that the case is not worth litigating? Thanks!

[bkmaggster]

What does your lawyer think?

40k in vehicles and music lessons for your children sound discretionary. Can you convert to a 13 instead, or is it too late?

[happy_ira]

I had a somewhat similar case (do a search on my name) which the UST got involved due to high income (over $200k). The UST filed a motion on abuse and was objecting on "totality of circumstances". However, my attorney called the USTs office and said "Fine. You can object on *totality* but then you need to LOOK at the totality as to what is causing the need for Ch 7 relief". He argued that the judge (if it went that far), would look at this very totality that the UST was potentially objecting to.

The UST dropped the case. If you are in NY, private msg me and I'll give you the name of my atty.

HOWEVER, the expensive cars and "extra" items like the lessons are not going to help your case. You need to make sure you are still in Ch 7 territory even once these are carved out.

Meanwhile, do a search on my name in whichi I give more details on fighting the UST on exactly this thing.

GOod luck.

[Liore1477]

My lawyer thinks that we stand a chance to convince the judge that these are reasonable and necessary expenses. Are we supposed to get some type of an itemized list showing what is being disallowed?

Happy_ira, my question is - there is a lease allowance of $460 per car that is an IRS standard. Can they disallow these? Our leases are higher than this, but I have no problem going with $460 per car.

As far as music lessons, my non-filing spose pays for them. That was included in the marital adjustment. Can they still disallow that?

[hereforinfo]

$80k for 2 cars is "reasonable and necessary?"

[backtoschool]

When I was living in nyc last year and wanted to file bankruptcy, I met the standards for a chapter 7, but my attorney said that because I made over 170k a year that the trustee would throw it out and make me file a chap 13 even though on the schedules I passed all tests.

I ended up not filing either a chapter 7 or a chapter 13 and was going to settle my debts on my own. Then I got laid off and now my income is only unemployment insurance and I filed chapter 7. (I now live in the midwest)

So at least in nyc where I was living last year, the trustees do NOT want to see high income chapter 7 filers.

[goingcrzy]

Wait. Was it dismissed or motion to dismiss? You can still go to court if it is motion to dismiss. Let the judge figure it out. Your lawyer should have a good idea of the local case law in these situations.

[backtoschool]

In any case it should be able to be converted to a chap 13. New York really wants high income filers in chap 13's and not chap 7.

[JRScott]

Do you parents live in your household?

Music lessons are probably a luxury. The cars could be considered that but depends on your job and circumstances of course.

If your lawyer things he can beat it perhaps a meeting with him and discussing what he plans to do and see what you want to do. Might also discuss what you can do if you cannot get these expenses included like filing a Chapter 13

[Liore1477]

To answer some of your questions...

- It was a motion to dismiss, there is a court date set for Oct., and my lawyer also said there would be a deposition procedure.

- My dad lives with us, my mom and mother-in-law each live separately
- When asked about whether the cars would raise a red flag, my lawyer said no because of my job (meet with clients) and high income (i.e, it is normal in my circumstances to lease a car like this). Plus, the cars carry a much better warranty than cheaper vehicles and their reliability rankings are top.
- There is always an option to convert to Ch. 13, but we will fight.

Thank you all for the support, I will be keeping everyone posted on what's going on. This will be a good primer for high-income filers.

[pcn]

I’m a little surprised by the tone of some of the responses. People in different income brackets have different levels of possessions, just as they have different levels of debt. To think (or act) that one can’t be well off and experience the same financial issues as lower income folks is a little naive (best/nicest word I could use).

I think music lessons could fit under entertainment or another broad category.

Good luck in your fight.

[goingcrzy]

We are going to court in Oct also. Mostly for our mortgage payment. The US trustee did bring up our cars at the 341. Hubby has a nice car, the UST trustee asked if he used it for business. Hub told her he uses to see clients and a portion of the car is written off on taxes as a business exp. UST never brought it up again, even in her arguments in motion to dismiss. (and she is looking hard for reasons to dismiss us, including asking why we had to talk to our son, who is overseas, so much)

I wonder if a portion of the car is written off as a business expenses, then the rest of the payment may fall under the irs allowances?

[Liore1477]

Thank you, PCN and GOINGCRZY!

As for some pesky comments, I ignore them. Envy is an evil, and the one who is always envious of others may eventually fall ill (it does affect your liver, heart and nervous system).

I really, really appreciate the tip on business write-off for the car. I do have that on my tax return, and for some reason I have not thought about it in relation to BK.

Music lessons do have a good justification, too. I will speak to my atty about this one.

[Chowder]

I really, really appreciate the tip on business write-off for the car. I do have that on my tax return, and for some reason I have not thought about it in relation to BK.
.

Lot's of post about cars being used as a "tools of the trade" exemption.
Sometimes it flies, sometimes not.

[hereforinfo]

Thank you, PCN and GOINGCRZY!

As for some pesky comments, I ignore them. Envy is an evil, and the one who is always envious of others may eventually fall ill (it does affect your liver, heart and nervous system).

I really, really appreciate the tip on business write-off for the car. I do have that on my tax return, and for some reason I have not thought about it in relation to BK.

Music lessons do have a good justification, too. I will speak to my atty about this one.

Exactly what is there to be envious about?