US Trustee Review Questions

[cw99]

We knew that there was a likelihood of a review by the UST because of our unsecured debt amount of $220k but i am wondering if anyone has had any good/bad experiences regarding this type of review. The documentation that they are requesting is excessive but can be put together for them. The concerns that i have are surrounding some of the questions that they are posing like

"debtors should state the reasons they feel it is reasonable and necessary to retain a house along with the concomitant expenses at a time they are seeking to discharge over $229,000 of unsecured debt"

"debtors reports that Mrs. x is self employed and loses $1786 each month in her business. Given the losses, debtors should explain why they feel it is reasonable to continue the business"

There are a total of 12 points similar to this throughout the letter.

While my husband's income does not fluctuate, we have expectations that mine will increase in the next few months, at least to break even. I am an independent sales rep and like everyone else's industry that has been hit with this economy, mine has as well but things are beginning to look up and i have diversified a bit to make things workable. Our problem is that during the 2 years leading up to the BK filing, i saw a gross income loss of over $200k but very little change in expenses, so the debt accumulated. We never contemplated filing prior and were current with our bills right up until the attorney told us to stop paying, and it was the totality of the debt that made us realize that we can't dig out of this anytime soon. Our attorney thought we would be 13 until she ran the means test and we failed so she filed 7.

Is the likelihood that we will convert to a 13 and if so, what happens if we don't have enough disposable income at month's end to qualify for a plan but they don't approve a 7???

Any insight that anyone can give me on a this situation or one similar would definitely help me and would be greatly appreciated.

[btbeme]

No experience here, but maybe I can add some food for thought...

The US Trustee has ultimate responsibility to ensure that the BK process is followed and not abused. While the Trustee seems like an adversary at times, they are really the gatekeepers of the process. And, never lose sight that a bankruptcy is supposed to be a new beginning for you. This "second chance" is rare in life, and this process in the United States is almost unique in its generosity. In many other countries, if you cannot pay your debts, you can lose your freedom until your family pays them for you, or you can lose a limb - literally.

With that in mind, the UST has to ensure that cases fall under the Prime Objective of giving you a second chance. While the amount of unsecured debt might be what triggered the UST involvement, his questions about what you plan to do afterwards are absolutely valid. They are not intended to intimidate you. They should, however, make you think - HARD - about your situation, and your expectations. You yourself admit that you did not expect to be in this situation. The UST is simply asking if your expectations going forward are realistic, and he wants you to "sell him" that they are. This is for YOUR protection, because this is your last chance for the next 8 years to make it work - or suffer the real pain of lawsuits, garnishments, and other fiscal atrocities.

That might mean that your answers to some of his questions are not what you would like to say.

In some ways, BK is one of the biggest doses of Tough Love you will ever find.

[cw99]

Thank you for taking the time to respond. I completely agree with and understand their purpose but was taken aback a bit by some of the questions/requests and also the verbiage used. I guess that my main concern lies in what happens if they feel we need to convert to ch 13 but we don't qualify for a repayment plan. I know that this wasn't a case of abuse, as while we did accumulate debt over the past 18 months prior to filing, we also paid just shy of $100k back to our credit cards during that time. Until we really took a long hard look at our income to debt ratio, we had no intentions or thoughts of filing any form of bankruptcy. At that point, the overwhelming numbers made me realize that while we might be able to dig out in 20 years, that seemed very unrealistic. By no means did I think this process would be easy and places like this forum have made finding answers to questions easier but I haven't seen anyone who has run into a problem such as this and was hoping for some insight...good and bad experiences...though I was really hoping more for good.

[SunshineGal]

Search the forum for "2004 exam" and you will find quite a few people who went through this. Best of luck and please keep us updated.

[btbeme]

CW, from the questions the UST asked (at least, the two you noted), he does not seem interested in the past, which is a Good Thing - probably not looking at "fraud" as you and I would define it.

What he seems to be leaning toward is how you will survive going forward, and whether he can basically force a Ch 13 by refusing the Ch 7 for totality of circumstances. By his questions, not having a house payment and not having to take a business loss each month might make you eligible for an affordable Ch 13 payment - and he wants your opinion as to why he should not force that issue. Filing a Ch 7 puts the Trustee in the driver's seat, and as my grandfather once told me, there isn't a more powerful person in the US than a BK Trustee...except for maybe a BK judge.

If the UST refuses the Ch 7 you will have a choice between trying to make a Ch 13 work (quite painful, as it sounds like you will have to rearrange a lot of your life to fit it), or an outright dismissal, which will bring on an immediate response from your creditors, none of whom will be in a good mood.

Speak frankly with your attorney about how to make a Ch 7 work. You may not like some of the answers, but they will likely be better answers than a dismissal or a 13 in the long run.

Good luck. This is not a fun trip for most of us, believe me. Mine was beyond challenging, but I am glad I made the adjustments I did and am now on the upswing.

[tobee43]

No experience here, but maybe I can add some food for thought...

The US Trustee has ultimate responsibility to ensure that the BK process is followed and not abused. While the Trustee seems like an adversary at times, they are really the gatekeepers of the process. And, never lose sight that a bankruptcy is supposed to be a new beginning for you. This "second chance" is rare in life, and this process in the United States is almost unique in its generosity. In many other countries, if you cannot pay your debts, you can lose your freedom until your family pays them for you, or you can lose a limb - literally.

With that in mind, the UST has to ensure that cases fall under the Prime Objective of giving you a second chance. While the amount of unsecured debt might be what triggered the UST involvement, his questions about what you plan to do afterwards are absolutely valid. They are not intended to intimidate you. They should, however, make you think - HARD - about your situation, and your expectations. You yourself admit that you did not expect to be in this situation. The UST is simply asking if your expectations going forward are realistic, and he wants you to "sell him" that they are. This is for YOUR protection, because this is your last chance for the next 8 years to make it work - or suffer the real pain of lawsuits, garnishments, and other fiscal atrocities.

That might mean that your answers to some of his questions are not what you would like to say.

In some ways, BK is one of the biggest doses of Tough Love you will ever find.

personally i believe this is an excellent analogy with respect to a trustee's position and responsibility....unfortunately they are accountable as we all are.

also, i understand the way these letter pose the questions are somewhat alarming, however, they usually are standard. many times when someone is self employed the trustee just needs verification with relation to expenses etc., which actually, you most likely have for your tax prep work already.

cw99....bk is most certainly an emotional and somewhat scary ride....but you'll manage just fine i'm certain.

[cw99]

The UST is looking for 1 years worth of c/c statements and any charge or cash advance over $500 explained which is reasonable and while i am pretty sure i can explain the majority, i doubt that i can do it 100% so hopefully he will be accepting of that.

We have a meeting with our attorney tomorrow (phone) to discuss the points though her paralegal made it pretty clear that an official answer would not be done by next Friday (the 341 meeting and also the date the UST wanted docs back by). Should I be concerned with this? I don't want to antagonize the UST if we don't have to.

Any suggestions on what would make a chapter 7 "work"?

We have not accumulated any additional debt since filing and we were actually never late on any of our payments until the attorney actually said we needed to stop paying the c/c companies. We have made adjustments in the household already over the things we have control over with regards to spending and while my husband has been looking for a 2nd job (nothing yet), i have added additional lines to represent in the hopes that while they will add more expense, that the income generated will produce a net profit. If we had a crystal ball, we wouldn't have gotten here in the first place and i can't guarantee to him that we won't have any problems moving forward...who could...but i can guarantee that this has been a huge wake up call for us and we will never knowingly allow ourselves to get back into debt at all.

ADDITIONALLY>>>ADDED AFTER>>>And while we definitely accumulated more debt in the past 2 years to get us to the point where we are currently, we did pay over $90k to c/c companies over the past 18 mths prior to filing. I am hoping that while there is a high amount of debt, that some of it is business and we were making an honest effort at repayment. In your experience, do you see this being construed as "fraud"?

[msm859]

Actually your high repayments may be hurting you. If you paid over $90k last 18 months i.e. $5k/month, the Trustee may think you should be in a 13.

[cw99]

Terrific. How is it that doing what you are supposed to gets you in more trouble? I understand why but it doesn't make it any less frustrating. Actually I am hoping that he sees that some of those payments came from cash advances as needed (robbing peter to pay paul) to stay current. That is why we decided to file...just seemed like we were putting off the inevitable. They are saying that we are upside down $4803/mth right now and some of the months that they were using in the computation included payments to c/c companies. Maybe he'll see that without the debt that we can actually manage (at least break even) with our obligations (minus the unsecured debt) with the income we currently have. Thoughts?

[tobee43]

Actually your high repayments may be hurting you. If you paid over $90k last 18 months i.e. $5k/month, the Trustee may think you should be in a 13.

i agree...that could happen ...i don't know how the trustees have been in pa...but in florida it's a hard nut to crack when your self employed...however, if you have all the docs to back you up you really should be fine...provided everything is there and in order...really, all you have to do is prove what your saying.

[BKHELP138]

I agree with tobee, the Trustee thinks you should be in a chapter13. I do not think you got audited for your debt but due to being over median income. The trustee wants to see if you sold the house and closed the business that you would be able to be in a chapter13. Knowing more ,like your income and expenses would help to find that out. How long since you used your CC before you filed ? Being in Pa maybe the debt is considered high. Here in CA 220k is nothing. I have seen cases from 20k to 30 million .....

[tobee43]

I agree with tobee, the Trustee thinks you should be in a chapter13. I do not think you got audited for your debt but due to being over median income. The trustee wants to see if you sold the house and closed the business that you would be able to be in a chapter13. Knowing more ,like your income and expenses would help to find that out. How long since you used your CC before you filed ? Being in Pa maybe the debt is considered high. Here in CA 220k is nothing. I have seen cases from 20k to 30 million .....

yes, that's a good point...it's all relative to location as well. LOL!! right in calif...(i was born and raised) just the smallest of homes in the bay area were going for over a million just a few years ago!

[BKHELP138]

Great article I found. Talks about audits in more detail and states most are done by random or due to expenses and income ratios.Click for more info on audits and the rest of the article

[tobee43]

Great article I found. Talks about audits in more detail and states most are done by random or due to expenses and income ratios.Click for more info on audits and the rest of the article

ahhhhhhhh.....i couldn't get there...it went to the opppppp's page??

[BKHELP138]

http://www.*************************...udit-risk-low/