707b3 and settlement

[yellowstone]

Our US Trustee just asked for another extension of time to object. We passed the means test, but they think we may be dismissable under 707b3. Our schedule J shows no net income, but at the examination, he said that our rent is too high and that we can't keep making 401k contributions. There were lots of questions about why we rented the house we did, etc...

I think I explained our reasons pretty well, good schools, close to extended family, etc... for why we live in an expensive area and noted that our rent is actually on the low side. But anyway, I was kind of surprised by the focus on schedule J, since I would have thought the focus was on how much our unsecured creditors would get in a 13.

I did some research and discovered that the 401k contributions aren't factored into disposable income in a 13 plan. Also, in a 13 our lack of a car payment would seem to offset the excess rent, so we would still basically have zero to pay the unsecureds in a 13. To me, that seems like a non-abusive 7.

However, it looks like we are going to be fighting this one in court. Can we just offer the US trustee to deliver a sum of money to the Ch 7 trustee to settle this and be done with it? Can they settle cases that way? At this point, I would gladly pay $5,000 or so just to be done with the process, even though I would pay less than that in a 13.

[billycool]

I'm far from an expert, but...

...I think indicating that you have cash to make a settlement offer in the middle of a Chapter 7 filing is probably a bad idea.

Your case sounds similar to mine. Does your attorney have a good rapport with the UST? Hopefully, he's good-naturedly trying to get the UST to give you a pass, while simultaneously indicating that he's willing to fight a court battle on your behalf.

I did a search of the cases in my district and found that almost none of these 707b3 things make it to the courtroom, which made me realize that the UST generally just tries to bluff you into convering to a 13. Unless you've got real problems with your numbers (like if that rent number is really godawful), I'd stick it out.