What Happens If I File Chapter 7 And The Trustee...

[blockhead]

If your secured payments are more than the average for your area based on IRS standards, then the US Trustee will dismiss your case under "totality of circumstances".

Are you sure? Certainly this is not true in circuit 1. My PITI payments were almost 6K a month. I was audited by UST probably because of high unsecured, self employed and over median and it worked out OK, and they were never suggesting I find a cheaper place to live.

[UWFan]

Are you sure? Certainly this is not true in circuit 1. My PITI payments were almost 6K a month. I was audited by UST probably because of high unsecured, self employed and over median and it worked out OK, and they were never suggesting I find a cheaper place to live.

Another good story. Thanks for posting. My PITI is slightly higher, but in the same ballpark for my primary residence. This ruling may vary widely district to district or something.

[DeadManCrawling]

We had a similar situation.

The trustee did not challenge anything, and we had very high expenses.

This is in Florida, so may not apply to you, but it was our experience.

We filed Ch 7 in the Middle District.

IRS allowances for housing here are a miserable $1,100/month or so.

Our total claimed expenses for housing were $7,500/month. This included a 4k mortgage payment and all the other expenses like maintenance and insurance, etc.

We let the house go in the BK. Though we were way above the allowance, it was allowed, and we were not hit with a presumption of abuse charge. So, we came out the other side with a sizable income intact, and a successful Ch 7. There has been litigation in FL about this, but courts have sided with debtors. Whether this applies elsewhere I don't know.

I wanted to let you know that it is possible to do, at least in some districts.

Ours was rather unique, in terms of cases, even among this board. If you would like to PM with questions, feel free. I don't want to put it all out here again, and risk annoying some of the other long-time posters.

[backtoschool]

Rulings vary greatly from district to district. And has been stated there are exceptions that get through even in districts that are tougher.

My points earlier were to make sure that the OP understands that this will be a US trustee involved case that will require a lot of documentation, and that it will be very difficult to get a chapter 7 if the non-housing expenses are outside the norm. The US trustee is trained to look for car expenses and other household expenses that are outside the norm, and use that to kick the filer into a chapter 13.

As with anything in life, ymmv.

[UWFan]

We had a similar situation.

The trustee did not challenge anything, and we had very high expenses.

This is in Florida, so may not apply to you, but it was our experience.

We filed Ch 7 in the Middle District.

IRS allowances for housing here are a miserable $1,100/month or so.

Our total claimed expenses for housing were $7,500/month. This included a 4k mortgage payment and all the other expenses like maintenance and insurance, etc.

We let the house go in the BK. Though we were way above the allowance, it was allowed, and we were not hit with a presumption of abuse charge. So, we came out the other side with a sizable income intact, and a successful Ch 7. There has been litigation in FL about this, but courts have sided with debtors. Whether this applies elsewhere I don't know.

I wanted to let you know that it is possible to do, at least in some districts.

Ours was rather unique, in terms of cases, even among this board. If you would like to PM with questions, feel free. I don't want to put it all out here again, and risk annoying some of the other long-time posters.

Wow! Thank you very much. I wonder why sometimes the expense is allowed and not questioned and other times it seems to be questioned and presumed to be abuse? All these figures are more or less similar. 6-8k mortgage payments so I wonder if there is some differentiating factor other than simply different ways of doing things in different districts. I mean I would understand if the mortgage was 20k per month or something and I was trying to come out of the bk with 20k per month in income, but that isn't the case. It's interesting to me that you didn't keep the house and still filed bk without presumption of abuse being filed. That is the same situation I am in more or less. The crazy thing is I will have money to pay creditors without the secured payments which I am discharging, but I am not eligible for a 13 so they don't really offer a realistic option for me other than filing a chapter 7. Stupid laws.

I have only found one case in my state so far where the trustee has tried to knock the mortgage payment and the trustee failed in doing so and the chapter 7 was granted. 1 case is hardly a sample size large enough to make me feel better about how my district handles such cases, but hopefully my attorney actually knows what she is talking about.

Thanks again for posting your experience with this!

[UWFan]

Rulings vary greatly from district to district. And has been stated there are exceptions that get through even in districts that are tougher.

My points earlier were to make sure that the OP understands that this will be a US trustee involved case that will require a lot of documentation, and that it will be very difficult to get a chapter 7 if the non-housing expenses are outside the norm. The US trustee is trained to look for car expenses and other household expenses that are outside the norm, and use that to kick the filer into a chapter 13.

As with anything in life, ymmv.

Hey, I really appreciate your responses. I am a planner even though it looks like I didn't plan my finances very well and I like to understand all of the reasonably plausible scenarios. I only have 5 months left on my car payment and I don't need it to qualify for the means test. They can knock the payment down to 400 or whatever the accepted number is and I would still pass the means test. The bottom line is if the house payment stands and I can use it, I will qualify before my house goes to the auction block. If not, I am screwed. I really don't need any other out of the norm expenses to qualify. Do you think that this makes a difference?

[backtoschool]

Hey, I really appreciate your responses. I am a planner even though it looks like I didn't plan my finances very well and I like to understand all of the reasonably plausible scenarios. I only have 5 months left on my car payment and I don't need it to qualify for the means test. They can knock the payment down to 400 or whatever the accepted number is and I would still pass the means test. The bottom line is if the house payment stands and I can use it, I will qualify before my house goes to the auction block. If not, I am screwed. I really don't need any other out of the norm expenses to qualify. Do you think that this makes a difference?

The means test is only the first hurdle. I am not trying to be negative, I am merely preparing you for the emotional impact of dealing with the US trustee. You have several red flags that may cause the US trustee to go for a "totality of circumstances" dismissal. That is my main worry in regards to your situation. The fact that others have gotten through the system is nice, and may be a feel-good thing to say, but it will not help you when you are being given an anal probe by the US trustee.

[kmbk2b]

UWFan -- you can PM me your district or state if you want and I'll let you know if my case was in the same state. There is a lot of precedence to support your situation in my state (according to my atty).

[UWFan]

The means test is only the first hurdle. I am not trying to be negative, I am merely preparing you for the emotional impact of dealing with the US trustee. You have several red flags that may cause the US trustee to go for a "totality of circumstances" dismissal. That is my main worry in regards to your situation. The fact that others have gotten through the system is nice, and may be a feel-good thing to say, but it will not help you when you are being given an anal probe by the US trustee.

Yeah, I understand. But, if using just my mortgage and the other allowed expenses at irs standards I qualify for the means test then what possible argument or red flag will matter? Yes, I made stupid purchases yes. Most people who have bk level debt did. I am not trying to hide the value of those purchases. Yes, I have a huge car payment that I do not plan on keeping. Are they going to penalize me more than they would someone else simply because I made a bad decision at a higher level? I mean, when I was making 30k+ monthly I had no problem making the 1300 car payment.

I understand they can dismiss my case for totality of circumstances, but if I haven't made any questionable purchases since I learned of my income decrease can they dismiss my case for totality of circumstances simply because I am a fool and thought my income wouldn't go down like it did. Or at least not prepare for it to do so.

The really only way they can dismiss me that I understand it is if my housing payment is successfully reduced. Are you saying this is incorrect and they can dismiss for other things? If my housing payment stands, there is no money left to pay creditors. If housing doesn't stand there is money to pay creditors. Is it more complicated than that? Can they try to dismiss based on totality of circumstances because they are not happy that I made large purchases in my past? Thanks. Just trying to understand where I stand.

[backtoschool]

Yeah, I understand. But, if using just my mortgage and the other allowed expenses at irs standards I qualify for the means test then what possible argument or red flag will matter? Yes, I made stupid purchases yes. Most people who have bk level debt did. I am not trying to hide the value of those purchases. Yes, I have a huge car payment that I do not plan on keeping. Are they going to penalize me more than they would someone else simply because I made a bad decision at a higher level? I mean, when I was making 30k+ monthly I had no problem making the 1300 car payment.

I understand they can dismiss my case for totality of circumstances, but if I haven't made any questionable purchases since I learned of my income decrease can they dismiss my case for totality of circumstances simply because I am a fool and thought my income wouldn't go down like it did. Or at least not prepare for it to do so.

The really only way they can dismiss me that I understand it is if my housing payment is successfully reduced. Are you saying this is incorrect and they can dismiss for other things? If my housing payment stands, there is no money left to pay creditors. If housing doesn't stand there is money to pay creditors. Is it more complicated than that? Can they try to dismiss based on totality of circumstances because they are not happy that I made large purchases in my past? Thanks. Just trying to understand where I stand.

I understand where you stand and have understood since the beginning of the thread.

You want to base your discharge on housing you are not keeping.

Many districts do not allow this.

The next step if they toss the housing expense would be to look at your other expenses.

Many of them are red flags.

That is where you stand.

I have pointed out the warning signs and I think you have a good grasp of the risks and pitfalls involved. For every case that gets through, there are many cases that get dismissed in your income and asset bracket. I am beating a dead horse here at this point. I think posters who have similar cases to you in the same district will be what you need to read about to truly know the strength of your petition.

And yes, the post-bk-reform system is designed to keep high income filers from filing chapter 7, so yes, you are being penalized more than someone who makes under the median.

[UWFan]

I understand where you stand and have understood since the beginning of the thread.

You want to base your discharge on housing you are not keeping.

Many districts do not allow this.

The next step if they toss the housing expense would be to look at your other expenses.

Many of them are red flags.

That is where you stand.

I have pointed out the warning signs and I think you have a good grasp of the risks and pitfalls involved. For every case that gets through, there are many cases that get dismissed in your income and asset bracket. I am beating a dead horse here at this point. I think posters who have similar cases to you in the same district will be what you need to read about to truly know the strength of your petition.

And yes, the post-bk-reform system is designed to keep high income filers from filing chapter 7, so yes, you are being penalized more than someone who makes under the median.

Ok, thanks. I wish I qualified for the 13. Then this wouldn't be an issue. Anyway, I think we understand each other fully. I guess I will just see what happens. It's not like I have very many choices here. I am going to try and call my unsecured creditors and see if any are interested in settling for 10 - 20 cents on the dollar. I could probably borrow enough money from my parents to pay off 25 or 50k, but I don't know if I will be able to settle for that.

Anyway, thanks for your time and responses.

[lindas13]

Relax just give it up . What good does it do to worry. If your lawyer says you qualify then just trust him and let all this worry go. Just give this all to your lawyer and Pray for the best. and go on with life. Your paying your lawyer to take care of this so just let him. Your case is not the worst case the trustee ever saw . People use credit cards and charge them up just like you. If we didnt abuse credit cards no one would need bankrupty. Millions of people do it everyday. Please stop driving youself crazy Everything will be ok. My daughter just closed on a 1.500.000.00 2 mo ago and she did all kinds of crazy stuff. but she also had a gambling problem. Just last month she got a new car and is no longer gambling. I know how stressful this stuff can be. I will pray for your situation that you will have peace and answers for relief. Good luck. ..Dont worry..

[Exployer1234]

If your case is dismissed then yes you can refile in 6 months. The only thing that may happen in a 6 month time is that companies may take you to court and try to garnish wages. After you file though those judgements would be voided and discharged if you are doing a chapter 7. Best of luck to you.