Presumed abuse letter

[Bkman2]

So I converted my 13 to a 7. August 23rd I had my new 341 meeting. Trustee asked me the same questions as everyone else. I was told I may have to pay something for my car but trustee didn't ask about anything, just if paperwork was right.

September 7th I got a letter "Statement of Presumed Abuse". I'm waiting for my attorney to get back to me about it. I looked on Pacer but I don't really understand the site. It does have at the top of the page....Chapter 7, Asset:NO


Should I have concern over this or do you think its just something everyone gets? Its a general letter with no real information on what they are looking for/at.

[justbroke]

Should I have concern over this or do you think its just something everyone gets? Its a general letter with no real information on what they are looking for/at.

Unfortunately, yes... this is cause for concern. While the "panel" trustee (Tee) saw nothing wrong and you're a no asset case, the United States Trustee (UST) has found something in your filing.

Check your Form B22A and see if the Presumed Abuse box is checked at the top. If it is, then your attorney already knew this and is probably has already prepared to fight. If not, then the UST finds that one or more of your expenses shouldn't be on your Schedule J and/or your Form B22A and it looks as though your case is an abuse.

Work closely with your attorney over the next 30 days. The UST has only 30 days to either file a motion to dismiss for abuse or to withdraw the presumption.

Just wondering... do you own a home and if so, are you surrendering it in the Chapter 7? Also, are you over or under the median income?

[Bkman2]

I just looked at the B22a form filed and the "presumption does not arise" box is checked. My attorney had to put that I excpected to have an increase in my income of $1000 a month because my income average fell to $760(gross), non-filing wifes fell to $2409(net). So he made it $1760 for me giving us a total of $4169(net) $5498 (gross) and the state limit for family of 3 is $5568(gross). Average money out was $4275 giving a -$105 a month instead of -$1105.

I can see the concern for that, my commissions from Dec/Jan and her tax refund is what covered it all until now. I got paid in Jan and then nothing until the end of July.

I have been able to keep up with the home payments so we are going to keep the house.

[justbroke]

It could be the tax refund. Did your attorney factor the tax refund into your income? If not, the UST may be using the tax refund as overwithheld income. It's not an over-the-median/under-the-median issue. It's an income versus expense issue.

For example. Let's say that you're a family of 4 and earn $4K/month or $48k/year. Regardless of the median income, your (allowable) expenses total $4,200/month putting you at a negative monthly income of $-200. However, you have received gracious tax refunds of averaging $4,800/year. The attorney did not factor this. The UST will see this and claim that you have an additional $400/month of earnings due to overwithholding. That additional $400/month now has your disposable income at a positive $200/month. This is above both threshold amounts of $109.58 and $182.50 for an abuse determination.

Also, if you have "earned" but unpaid income, that could be at issue as well. I do like that your attorney adjusted your income on Schedule I to account for your new income. My inkling is that there is something else. You're keeping the house, but what did the attorney put on your Statement of Intentions? Hopefully he wrote "stay and pay" and not "surrender". If he wrote "surrender", that could be an issue as well for the UST.

Until the UST files a motion to dismiss, you really won't know what they are thinking about. However, they will generally contact your attorney before the motion is submitted, to try to fix anything that is just a misunderstanding.

[Bkman2]

So her tax refund under the chaper 13 is income under the new 7? Would that not mean that my tax debt would be added to items paid?

That tax refund would give an added $854 a month(average) income. So it would have been better to keep my income at $760 and not change it to $1760?

How can they have a tax refund as added income when its income earned and counted in the chapter 13 gross average? Isn't that double earnings?

We are set to keep and pay on the house.

[justbroke]

So her tax refund under the chaper 13 is income under the new 7? Would that not mean that my tax debt would be added to items paid?

It's income for the purposes of calculating your REAL disposable income. Tax refunds have always been successfully argued, by Trustees, as simply "overwithheld" income. As income, it should be included in the "current monthly income" (CMI) calculation. If part of it is from the earned income credit (EIC) that could be argued as not part of the CMI calculation.

That tax refund would give an added $854 a month(average) income. So it would have been better to keep my income at $760 and not change it to $1760?

Probably! Strategy is strategy and this strategy may not have worked out.

How can they have a tax refund as added income when its income earned and counted in the chapter 13 gross average? Isn't that double earnings?

A refund is not "added" income. Think of it this way. You earn $4,000/month gross. $1,500 is taken out each month for taxes. At the end of the tax year, you get a $6,000 refund. That's because your withholding was $500/month too much. That's not double counting because your taxes are an allowed expense. If you don't have that expense, then it gets added back to your disposable income. In my example, your total Schedule I income (with taxes taken out) would have been $2,500. However, it should have been $3,000 based on the refund.

I know that almost everyone thinks it's double counting, but it's not.

Hopefully your attorney can get this all fixed. A tax refund that is over $854/month is a LOT of money that your attorney left out if indeed he didn't include it in your income already!

[Bkman2]

I know he didn't count it because it was her refund and she didn't file.

Maybe if that is the problem they can remove my fake added $1000 a month and add her tax refund. That would still have me under. I think it would be even less. If the fake +$1000 has me at -$105. then add the $854 (Tax average) minus the fake $1000 is -$251dmi

My $1000 is put down as "anticipated increase of income" on my schedule I

[justbroke]

I know he didn't count it because it was her refund and she didn't file.

Well, maybe the attorney "offset" it as spousal income that doesn't contribute to the household. However, you just admitted that you used that refund to survive all these months. So that particular argument wouldn't go far.

My $1000 is put down as "anticipated increase of income" on my schedule I

IT may be too late since you have already put the UST and Panel Trustee on notice that you do, in fact, anticipate an increase... enough so that you included it in your Schedule I income calculation.

[Bkman2]

I'm starting to understand the letter more. Letter says my current income mulitplied by 12 in not less than the requirements. I think I'm really lost now.....

Schedule I

My income $760
Spouse $3738 minus payroll deductions $2409

Anticipated incease $1000 for me (commission only work)Can show it never happened with P & L statements

TOTAL 1761+2409=$4170 x12=$50,040

Limit for family of 3 =$5568 x12=$66,816

If they did they tax refund average of $854+1761+3738=6353= over the limit

B22a has me $386(minus business costs) + spouse $3540 = $3926 TOTAL of $47,112

[justbroke]

I'm thinking that the UST added the $854/month average income tax return to your monthly income. Also, the over/under median income determination is done based on your gross income.

In any event... the UST doesn't like your numbers and has substituted his/her own numbers. This is common when they don't like a certain expense you're taking or they feel that your income was under-reported. The "requirements" statement is irrelevant, really. The true reason to deny a discharge, would be that your income less allowable expenses... is more than the allowed amount ($109.58 or $182.50).

[nfreeze]

So here is a question- if the panel trustee had entered a "No distribution" entry on your case and has requested to be excused from any additional at trustee, could the US Trustee over-ride the panel trustee or do they seem to agree before a "No Distribution" has been entered?

Curious as I am now in the 60 day club but did have a request for records from the US Trustee which I did provide about a week before the 341 hearing. (6 months bank statements, 6 months of pay stubs, 6 months of utility bills and last mortgage and auto loan statements)

[Bkman2]

I'm lost on all of this at this point. My income was and is below the limit. The trustee changed it from asset to no asset with no distribution. Now the US trustee is saying my income is to high????

Still no answer from attorney.

[blockhead]

I'm lost on all of this at this point. My income was and is below the limit. The trustee changed it from asset to no asset with no distribution. Now the US trustee is saying my income is to high????

Still no answer from attorney.

They (UST and CH7 trustee) operate independently

[justbroke]

So here is a question- if the panel trustee had entered a "No distribution" entry on your case and has requested to be excused from any additional at trustee, could the US Trustee over-ride the panel trustee or do they seem to agree before a "No Distribution" has been entered?

The UST and the Panel Trustee are two different people with two different jobs. The Panel Trustee is responsible for liquidating your estate and paying creditors. While the Panel Trustee can also seek to dismiss your case for abuse, it is the UST's primary job to seek dismissals where you are not deserving of a discharge.

Curious as I am now in the 60 day club but did have a request for records from the US Trustee which I did provide about a week before the 341 hearing. (6 months bank statements, 6 months of pay stubs, 6 months of utility bills and last mortgage and auto loan statements)

That means that the UST is reviewing your case. You were probably over-the-median income. In the over-the-median cases, the UST takes a much much much more closer look at the entire case, as that is their job. Generally speaking, the UST "usually" appears at the 341 Meeting to question you under oath, if there are issues. However, the non-appearance of the UST at the 341 Meeting doesn't mean there are not issues.

Additionally, if the UST has issues, they usually contact your attorney rather quickly (within days of the 341 Meeting). You are usually "on notice" if the UST has problems with your case. They usually don't spring a motion to dismiss on you without some prior notice.

[justbroke]

I'm lost on all of this at this point. My income was and is below the limit. The trustee changed it from asset to no asset with no distribution. Now the US trustee is saying my income is to high????y.

Because your income was probably calculated incorrectly! If the tax refund is the issue, then you are over the median income. It is also making you have positive disposable income which is above the limit ($109.58 and/or $182.50) for a Chapter 7 case.