Over Median = UST involvement/fraud suspect?

[liboton21]

So the UST did get involved with your case?

I'm filing next week. On a monthly basis, I was only $700 above the median. My lawyer said I was okay for BK7 and mentioned normally below 100K of unsecured debt are not being scrutinized by the trustee.

[LJoutWest]

The UST is involved in our case and filed a motion of presumed abuse. Here is what happened.

We went to our 341, checked our ID, swore us in, looked over and took about $1900 that was in our account from a miscommunication between our lawyer and us. Ouch. He stated he wanted our 2009 tax returns on Feb. 1st (our employers have til the 31st to mail them so I hope we get them early). Then he asked for creditors to come forward and the UST came forward. She asked us some questions and the trustee asked us to move to another room to finish. We did.

In the other room we found that our first filing had the our net income listed not our gross income and since we were over, and they had questions on our charitable donations, our food budget (I have a special diet for a medical condition that the UST is fine with), what our 401k loan was for moving forward (it was used to save our house which we surrendered) we had to file an amended return with all of our information. We were given 1 week to do so (our 341 was on a Tuesday, we had to have all paperwork in by the COB the following Wednesday. We met the deadline and filed an amended return that took us from about -$400 to $-932 in our budget moving forward. We received notification on Monday, Dec. 1st of the filing of presumed abuse which was officially filed on Nov. 27th.

Now to clarify this is what our attorney told us (practicing law since 1986, bankruptcy since 1992):
1. We automatically got this because of our income over the median and other flags, he has had this happen in other cases similar to ours
2. This gives them 30 days to review our amended paperwork to determine if they want to file a motion to dismiss (unlikely) or convert it to a 13 which they may try
3. They may file a statement that states why they are not filing a motion to dismiss or convert which is what happen to his other client who had this happen to them earlier this year
4. Even if they file to dismiss or convert we will examine their legal reasoning and if it is not sound or based on case law we will file a motion to oppose it.
5. Bottom line, the court/judge will determine what happens not the UST (so its not over until it is over)
6. Worse case we convert to a chapter 13. We were paying our bills before we filed. We filed because of a situation with our home loan servicing company who refused to work with us and forced us out threatening us with deficiency. Basically we were late in 2008 1x because Chase took $3500 out of our checking account instead of $350, would not give it back and my wife thought it was the house payment. Then the loan servicer would not put us back on direct payment so we were behind 2 months. In Jan. 2009 we were late because I was in the hospital and the refused payment from that point on, issuing an order of default followed by foreclosure and ordering us out by May 15 for a Sherriff sale that never occurred. Then they threatened us with deficiency judgment.
7. Our lawyer believes because of the buffer of -$932 we have built in, even as we expect the UST to question 2 or 3 expenses, we will still be around -$150 to -$200.

Lessons to be learned from our experience.

1. MOST IMPORTANT. On the day you file have no money in your checking/banking accounts. Get money orders the day before if you have to to pay your bills that are coming up.

2. Really, and I mean REALLY review your filing when your attorney emails it for you to go over. For that matter, we now demand to meet with him to review everything (we did on the amended return). In the end I and my wife put our signature there, though our attorney admitted it was his fault (it was his paralegal) and has not charged us and made us whole.

3. IF the UST gets involved, supply what they want. We gave them 6 months of our pay stubs, our 2008 tax return (and to prove our chartiable contributions our attorney provided 2006 and 2007 returns to establish that this was a on-going pattern) our Sept. Oct and Nov bank statements and a copy of our 401K loan.

4. Do NOT dispair or panic. I did and I will openly admit I am still nervous but we are willing to fight and the UST's representative knows that and has backed off on a couple of items because our lawyer showed case law for our district and in the nation that would support his listing of certain items on our schedule J. Remember the UST is trying to maintain the creditability of the process and doing a job, they are not our friends, and in the end it is the court that decides what happens if you have a sound legal case.

5. Minimize their interest then by having everything right the first time. I'll let everyone know what happens when we hear on either the 23rd (the 27th is on a Sunday and our courts are closed the 24th and 25th) or on Monday the 28th which is when our lawyer says the UST in our district replies; they wait til the last day or day before to reply because of case load. Still really hoping for the 7, but all I can do is wait, live my life and then my wife and I can decide what to do when we hear. Hopes this helps someone.

On December 3rd notices were sent to our creditors to ask if they want to ask for dimissal or conversion. The status on our case is Awaiting Discharge.

[coolmom04]

The UST is involved in our case and filed a motion of presumed abuse. Here is what happened.

We went to our 341, checked our ID, swore us in, looked over and took about $1900 that was in our account from a miscommunication between our lawyer and us. Ouch. He stated he wanted our 2009 tax returns on Feb. 1st (our employers have til the 31st to mail them so I hope we get them early). Then he asked for creditors to come forward and the UST came forward. She asked us some questions and the trustee asked us to move to another room to finish. We did.

In the other room we found that our first filing had the our net income listed not our gross income and since we were over, and they had questions on our charitable donations, our food budget (I have a special diet for a medical condition that the UST is fine with), what our 401k loan was for moving forward (it was used to save our house which we surrendered) we had to file an amended return with all of our information. We were given 1 week to do so (our 341 was on a Tuesday, we had to have all paperwork in by the COB the following Wednesday. We met the deadline and filed an amended return that took us from about -$400 to $-932 in our budget moving forward. We received notification on Monday, Dec. 1st of the filing of presumed abuse which was officially filed on Nov. 27th.

Now to clarify this is what our attorney told us (practicing law since 1986, bankruptcy since 1992):
1. We automatically got this because of our income over the median and other flags, he has had this happen in other cases similar to ours
2. This gives them 30 days to review our amended paperwork to determine if they want to file a motion to dismiss (unlikely) or convert it to a 13 which they may try
3. They may file a statement that states why they are not filing a motion to dismiss or convert which is what happen to his other client who had this happen to them earlier this year
4. Even if they file to dismiss or convert we will examine their legal reasoning and if it is not sound or based on case law we will file a motion to oppose it.
5. Bottom line, the court/judge will determine what happens not the UST (so its not over until it is over)
6. Worse case we convert to a chapter 13. We were paying our bills before we filed. We filed because of a situation with our home loan servicing company who refused to work with us and forced us out threatening us with deficiency. Basically we were late in 2008 1x because Chase took $3500 out of our checking account instead of $350, would not give it back and my wife thought it was the house payment. Then the loan servicer would not put us back on direct payment so we were behind 2 months. In Jan. 2009 we were late because I was in the hospital and the refused payment from that point on, issuing an order of default followed by foreclosure and ordering us out by May 15 for a Sherriff sale that never occurred. Then they threatened us with deficiency judgment.
7. Our lawyer believes because of the buffer of -$932 we have built in, even as we expect the UST to question 2 or 3 expenses, we will still be around -$150 to -$200.

Lessons to be learned from our experience.

1. MOST IMPORTANT. On the day you file have no money in your checking/banking accounts. Get money orders the day before if you have to to pay your bills that are coming up.

2. Really, and I mean REALLY review your filing when your attorney emails it for you to go over. For that matter, we now demand to meet with him to review everything (we did on the amended return). In the end I and my wife put our signature there, though our attorney admitted it was his fault (it was his paralegal) and has not charged us and made us whole.

3. IF the UST gets involved, supply what they want. We gave them 6 months of our pay stubs, our 2008 tax return (and to prove our chartiable contributions our attorney provided 2006 and 2007 returns to establish that this was a on-going pattern) our Sept. Oct and Nov bank statements and a copy of our 401K loan.

4. Do NOT dispair or panic. I did and I will openly admit I am still nervous but we are willing to fight and the UST's representative knows that and has backed off on a couple of items because our lawyer showed case law for our district and in the nation that would support his listing of certain items on our schedule J. Remember the UST is trying to maintain the creditability of the process and doing a job, they are not our friends, and in the end it is the court that decides what happens if you have a sound legal case.

5. Minimize their interest then by having everything right the first time. I'll let everyone know what happens when we hear on either the 23rd (the 27th is on a Sunday and our courts are closed the 24th and 25th) or on Monday the 28th which is when our lawyer says the UST in our district replies; they wait til the last day or day before to reply because of case load. Still really hoping for the 7, but all I can do is wait, live my life and then my wife and I can decide what to do when we hear. Hopes this helps someone.

On December 3rd notices were sent to our creditors to ask if they want to ask for dimissal or conversion. The status on our case is Awaiting Discharge.

wow.. I am stressing out for you just reading about your situation! Thank you so much for sharing all the info with us.

Can I ask you what other red flags there were (other than food and income)? Also, how much over the median were you?

[LJoutWest]

We were $24k over the median in our state, but are like I said -$932 under on the expense part of it (forgot what it is called).

Flags:

The largest error was in the initial filing of the B22a and the schedules with the wrong amounts entered.

Next, they questioned our charitable contributions so have documentation if you take that one.

We had to pay some misc. taxes and had to explain that which was no issue.

401k Loans; what were they for and when will they be paid off. This seems to have died down since the loans were to pay us current on our home loan and the loans themselves will not be paid off for a long time after the chapter 7 would be discharged (2 years for my wife and 3 more years for me). If they came off in the next six months that would have caused an issue for the UST in our district (I'll wait and see what their final documents states; the 401K loans were not part of our means test, on our schedule J I believe). There was a case in the 9th district about loans being paid off during the chapter 7 period which went against them. In our district 401K loans cannot be counted in the means test but so far have been allowed to be part of the expense part of it.

So the income, and the filing were the biggest issues and then the expenses listed above.

[Clouddancer]

Just because you are over median and over 100K shouldn't matter if you don't have enough money to pay your bills. I don't think a UST could or would try to push into a 13 when you can't fund it.

[LJoutWest]

If I understand it right, the UST right now is trying to find out if we have enough money after expenses to fund a 13. If they do then on the 23 or 27 their motion will explain why they feel that way. If not, they file a statement saying will they are not seeking conversion or dismissing. We'll see. We are under $100k by about $4k so that is a red flag to them. All we can do is wait for them. Hopefully everyone here is right and they won't try to push us into a 13, we'll see. Nothing we can do on our end until we see what they file. Again, our attorney thinks were fine but I don't trust anything or anyone in this process 100%.

[thereshope]

I'm over the median, but the presumption of abuse did not arise, the UST has not got involved. I'm over 30 days past my 341.

[Meatstick]

I'm over the median, but the presumption of abuse did not arise, the UST has not got involved. I'm over 30 days past my 341.

How much over the median are you ? Are you still going to have the same income post-discharge (as in reduced income) ? Just curious as we are over the median by $7-$10k on Form B22a and more than that on an annual basis.


Meatstick

[Kingxray]

If you are over the median income, does that automatically mean the UST will get involved? We're over by 8K.

We were over the median and filed and the UST got involved. We dismissed our case and refiled and the UST got involved again. Our lawyer says it is done randomly by the computer. If that is the case, I should play the lotto cuz our number came up twice!

[justbroke]

We were over the median and filed and the UST got involved. We dismissed our case and refiled and the UST got involved again. Our lawyer says it is done randomly by the computer. If that is the case, I should play the lotto cuz our number came up twice!

There are two things. There's the random audit, which is done "randomly" by computer. Then there's the UST involvement. The UST is involved in all cases, as they must review them.

What we are talking about in this thread, and what we mean by "the UST is involved", is that the UST has taken interest in the case and is request more documentation and/or filing a presumption of abuse or dismissal.

[BKman]

Thats why I have to go with a 13, because I'm over by $169 a month. My attorney said that I can add more costs to my means test because of being self employed but it will bring up a red flag. So I have to go 13 and then later look at my income again.

[justbroke]

Thats why I have to go with a 13, because I'm over by $169 a month. My attorney said that I can add more costs to my means test because of being self employed but it will bring up a red flag. So I have to go 13 and then later look at my income again.

FYI, disposable monthly income (DMI) of $169 is only a presumption of abuse. You actually can go to $182.50 as the upper limit. The presumption is overcome if $169 x $60 ($10,140.00) is less than 25% of your scheduled unsecured debt!

[PacificBlue]

We are over the median and was told by one (out of 10) lawyers it could go either way. The rest said flat out 13. We are seeing lawyer #11 today and get one more opinion before we move ahead. We were told by a couple of lawyers if we couldn't make it under then 13, (due to our unique circumstances) then simply convert it to a 7. We have since learned it's not as simple as.... well simple.

After my wife and I spent many hours going over our situation, we believe we are going to push for a 7 and take our chances before a judge. (if it goes that far, hope the UST will not take an interest in our case).

[StartingOver08]

PacificBlue, just because the UST is interested, does not mean you end up in a Ch 13. The UST was interested in mine too. I had to supply years of documentation. But ultimately, because my attorney fought for me AND because of the documentation after two 341's the UST did not file the presumption of abuse and I was successfully discharged from a Ch 7. The UST checks in on more cases than they convert or dismiss, because it is their job. You are right about having the right attorney though - a good attorney is your best shot to a successful BK.

[coolmom04]

So, this may sound like a stupid question, but what exactly is the UST looking for when they presume abuse?? Are they looking for more income than documented? Are they looking for large unaccounted for expenses (big TVs, etc?)

I'm wondering now... when we file... we were going to wait until my husband's bonus wouldn't show up on the six month look back. But, if the UST is going to get involved ($8K over median income, DMI = $96), is it even worth it to wait another three months?! He received a 5K gross bonus back in June. If the UST is going to ask for bank records & pay stubs dating back further than 6 months... well... there goes THAT idea.

I am beginning to wonder if we should just go ahead and file ch13. If you go ahead and file ch13, does the UST get involved if you are over the median, too? (ETA: I mean... do they get involved in the extent of suspected fraud like they do if you file ch7 and are over the median?) We only have 40K unsecured debt and gross yearly income is 89K NOT including the 5K bonus (median is 81K).