Notice of Presumed Abuse then Report of No Distribution?

[BenzUp]

I was audited by the UST prior to the 341 meeting (high income filer). The UST appeared at the 341 meeting with a couple follow-up questions and a request for a couple more docs. Less than 10 days later I received the dreaded Notice of Presumed Abuse. I gather this gives the UST 30 days to dismiss, convert or discharge.

Today, I noticed on PACER that there is a Trustee's Report of No Distribution.

Is this good news, considering the earlier notice of Presumed Abuse? Can I breath a little easier?

[Meatstick]

I am pretty sure it means your good to go with no assets.

How much over the median were you ? What questions did the UST ask and what extra documents did he request. Will you be over the median looking forward ?

[justbroke]

One has nothing to do with the other.

Let's talk about the Trustee's Report of No Distribution first. This is the Panel Trustee's report. The Panel Trustee (Trustee) is responsible for administering the assets of the Estate. If there is nothing to administer, the Trustee files a Report of No Distribution and asks to be removed from the case. This is absolutely what happens in a no asset case.

On the flip side, is the United States Trustee (UST). The UST is responsible for the entire legal administration of the case and represents the entire "process", for lack of a better word. They are responsible for making sure people don't abuse the system, and their mandate is to push as many people into a Chapter 13 as possible.

So, the UST's Notice of Presumed Abuse is important. The UST is saying that your case is presumptively an abuse and that from the UST's initial review, it appears that you are abusing the system and do not deserve a discharge. The UST has 30 days from the time they issued that statement, to either withdraw the statement or to file a Motion to Dismiss under 11 USC 707.

You should be getting prepared to fight the Dismissal, because it is likely that it is coming. There is something on your Schedule J or expenses (or even income) that the UST doesn't like.

What State did you file in and did you file through an attorney?

[BenzUp]

Filed in CA w/ Attorney. The attorney is suggesting that if they move to dismiss, we convert to a 13 ... (In my case, this has a side benefit of stripping the 2nd mortgage.) I wish I better understood the appeals process so I can assess whether to challenge the UST if they do, in fact, move to dismiss.

[justbroke]

Filed in CA w/ Attorney. The attorney is suggesting that if they move to dismiss, we convert to a 13 ... (In my case, this has a side benefit of stripping the 2nd mortgage.) I wish I better understood the appeals process so I can assess whether to challenge the UST if they do, in fact, move to dismiss.

If your attorney is so quick to suggest moving to a Chapter 13, I can see one of several reasons;

• You are over the median.
• You included 401(k) loan/contribution expense on your Schedule J
• You included payments on student loans
• You are surrendering property yet including the expense
• You have other questionable expenses that will not stand up to scrutiny

It isn't so much an "appeal" process but an objection to the motion to dismiss. In that you present evidence which refutes the UST's evidence that your expenses are disallowed (and that you have enough left over income to pay a meaningful dividend to unsecured creditors).

You seem to be taking this better than most.

[BenzUp]

You are correct - I am

-- Way over the Medium
-- Included a 401k loan repayment on Sch J (learned this is disallowed during my audit)
-- Wanted to surrender one of two cars (attorney told me to hold-on to it but I was completely honest during my audit when asked 'why I needed 2 cars' (perhaps to a fault) as giving up this car would through off my Sch. J.

I'm not so much upset as I am tired. Besides, with a Ch. 13 I should be able to strip a 15 year 2nd mortgage payment (God willing and UST allowing). Maybe it's the better of two evils.

In a Ch. 13 - am I looking at this being on my credit report for 12 years? (5 years of pmts + 7 years after discharge?)

[justbroke]

In a Ch. 13 - am I looking at this being on my credit report for 12 years? (5 years of pmts + 7 years after discharge?)

No. Just 7 years, from filing.

[BenzUp]

Thank you justbroke.

[curiouscat]

I've searched here under "presumed abuse" before asking my question, but if its been answered before please point me to the right thread. We filed Chap 7 about a 6 weeks ago, received a clerk's letter of presumed abuse in the mail, attended our 341, which went off without a hitch and the UST did not show up. Then about 8 days later we received a UST Notice of Presumed Abuse.

We are over the median. Median here is CA county is approx. 68K and we are approx. low 100s. As just broke mentioned about student loans and such, we did include those, but my understanding is that I cannot discharge them anyway and will have to pay them off (that's fine, I'm not trying to weasel out on student loan, but DID have to list it or I would have perjured myself). We also have two 401K loans that we are paying back. We have elderly parents we take care of (not an allowed expense) and we take care of two grandchildren (free of course) almost every weekend while mom works.

On the presumed abuse letter it stated that we had "checked the box for presumed abuse." Well, duh! We had to, under penalty of perjury. I don't understand that. Were we supposed to lie?

Before we received the dreaded UST Presumed Abuse, the panel trustee said he saw no assets to be distributed and sent us that letter (can't rememember official name of letter). I've called my attorney and am waiting for an explanation/callback and he did originally tell us this might happen as we are over the means and they will try to push us into a 13.

My question (and I will ask him this too) is if I don't want to keep my house can they make me still go into a 13? Also if this UST forces me into a 13, can I convert later to a 7 is things go even further south? Does the UST and the panel trustee and judge and my attorney duke it out in court? Or is the panel trustee out of the pic now and just the UST, atty & judge? Do the USTs routinely not like the decisions of the panel trustee? Just trying to figure out what's going on.

I know everyone says not to take it personally, but I'm already stressed enough without dealing with Bush's BK Bill goons.

Cant reveal too much, but our situation is rather unique in that we are disputing the ownership of our house in an AP and depending on how that plays out will either keep or not. I'm thinking UST doesn't like this line of thinking either.

[justbroke]

My question (and I will ask him this too) is if I don't want to keep my house can they make me still go into a 13? Also if this UST forces me into a 13, can I convert later to a 7 is things go even further south? Does the UST and the panel trustee and judge and my attorney duke it out in court? Or is the panel trustee out of the pic now and just the UST, atty & judge? Do the USTs routinely not like the decisions of the panel trustee? Just trying to figure out what's going on

It's more an issue of denying you relief through Chapter 7, then forcing your into a Chapter 13. You cannot be forcibly be put into a Chapter 13... as the choice is up to you.

You cannot convert just because things change during your Chapter 13. Each case is weighed differently. Some Districts may require you to dismiss the Chapter 13 before refiling a Chapter 7. Some Districts require a new means test when converting... others don't. It's too District and case specific to make any general statement as to whether further deterioration of your financial status, while in Chapter 13, warrants a conversion.

The Trustee and UST and Judge don't fight each other... as they are administrators of the law itself. They fight the creditors or the debtor... and the Judge is decidedly neutral, as they are the finder of fact. If you read what I wrote above, the Panel Trustee filing a no distribution report has absolutely nothing to do with abuse or presumed abuse.

[curiouscat]

ok, gotcha on the panel trustee thing. I just "assumed" that the clerk and the panel trustee were part of the same package and was thrilled and thought I was "out of the woods" when I received the no asset distrubtion letter. Only to be dashed upon the rocks by the UST. My atty still hasn't called/e-mailed me back. Sounds like its time to recontact & direct my questions that way.

Thank you for responding so quickly and sharing your knowledge - its appreciated.

[justbroke]

You are welcome. It certainly stings to have received a report of no distribution and withdrawal of the (panel) Trustee only to have the United States Trustee (UST) come back and rain on your parade. However, they are two distinct functions within the bankruptcy process. For most, the report of no distribution is the last thing they ever see before getting their discharge.

I would certainly go back to your attorney and read the statement of presumed abuse and see if there are any clues there. Usually, the UST will complain about your expenses such as surrendering property, a 401(k) loan or contribution, or payments on Student Debt.

[curiouscat]

You are welcome. It certainly stings to have received a report of no distribution and withdrawal of the (panel) Trustee only to have the United States Trustee (UST) come back and rain on your parade. However, they are two distinct functions within the bankruptcy process. For most, the report of no distribution is the last thing they ever see before getting their discharge.

I would certainly go back to your attorney and read the statement of presumed abuse and see if there are any clues there. Usually, the UST will complain about your expenses such as surrendering property, a 401(k) loan or contribution, or payments on Student Debt.

Ok, I don't mean to be obtuse, but don't we HAVE to pay student debt? I guess I just don't understand how she thinks I can stop payments on that!!! They (gov't) will lien my bank account, garnish my wages and revoke my driver's license so I can't get to work (and then I won't have a job) if I were to stop making my studen loan payments (which are only $150 a month anyway - but I have another 10 years to go on them). Is there a way to stop your student loan payments? Or am I wrong?

And we do have contributions to our 401K, but from what I have been reading if you have no pension or any employer sponsored retirement you are allowed to contribute to 401K if you are close to retirement age (husband 50)? DH contributes about $133 a month and I contribute a whopping $50 to mine.

I agree with you though, I'm thinking she's not liking the 401k, the student loan, the higher house payment than $950. REALLY, not many folks in my area of California who recently bought have a house payment of only $950. We have one car with a 550 payment, but only have 20 months left to pay so wanted to do a ride-through (we are current) and reaffirm. Its our house payment that's causing all the ruckus.

Someone here said its UST's job to be picky & I believe that person is correct!

[justbroke]

Ok, I don't mean to be obtuse, but don't we HAVE to pay student debt?

Student loans go into forbearance during a period of Bankruptcy. Combined with the fact that they are non-dischargeable, they are not a valid expense in a Chapter 7. They are unsecured debt and unsecured debt is technically dischargeable. Yeah, it's double-speak, but thank the people in Congress for this.

And we do have contributions to our 401K, but from what I have been reading if you have no pension or any employer sponsored retirement you are allowed to contribute to 401K if you are close to retirement age (husband 50)?

They don't consider 50 as close to retirement. If he hit 59 or over, they may allow accelerated payments into a 401(k). It's more about what a person is required to do and what's optional/voluntary.

I agree with you though, I'm thinking she's not liking the 401k, the student loan, the higher house payment than $950.

If you own the home, the house payment is irrelevant. However, the student loan and 401(k) are prime targets for an UST to pursue dismissal.

Someone here said its UST's job to be picky & I believe that person is correct!

Yes, their job is to protect the integrity of the program.