Chapter 7 tough question...

[lichteda]

So I need some professional help… lol, chapter 7 that is.

Back in November 2008 my wife and I filed chapter 13 in Michigan. During that time, I received two bonuses from work and 2 tax returns. Of which, were turned over the trustee (we kept a portion by filing plan modifications)
The first year, the trustee paid all unsecured debt and refunded about 5k. The mortgage bank objected the closing of the 13 and converted their secured claim to an unsecured claim of 202k.
So, the only creditor remaining is the mortgage bank.
So, we converted the case to a 7 and are now 30 days into the 60 day objection period. The same bank is claiming to our lawyer (nothing filed with the court) that we disobeyed a court order (while in 13) and want $17k from this year’s tax refund and bonus. (Note, we have fully disclosed the income to the court and were in process to excuse it from the 13… we converted to 7)
My lawyer says they are in a very weak position and would stand little chance of having the debt declared non-dischargeable. But there is always the possibility… My lawyer says even if it did “go their” way, it would be over turned under appeal.
So we agreed in discussion to a 10k settlement. And…. we got the paperwork today… and now the issue.
The bank wants to reaffirm the debt at a single payment of 10k, 3 days before the 60 days are complete. But then they ask the court to extend their objection period an additional 70 days.
Additionally, the paperwork clearly states that the debt is removed from the chapter 7… which I don’t want to do. I like having the protection!

1. That the parties to this Stipulation are Creditor, and XXXX
2. Creditor alleges that the Debtors are not entitled to a discharge pursuant to § 727(a)(6)(A) of the Bankruptcy Code.
3. In order to settle this matter, creditor has agreed to accept Debtors’ agreement reaffirming a portion of their debt to creditor.
4. In order to effectuate this agreement, the parties request that the deadline for filing an objection to the dischargability of all debts be extended as to creditor to 70 days following the entry of the filing of the reaffirmation agreement between the parties.
5. This pleading shall not be deemed as an admission of liability by any party, and shall not constitute a waiver or limitation of any parties’ rights under the Bankruptcy Code or applicable state law with respect to creditors claim.
6. The parties’ Reaffirmation Agreement is filed contemporaneously herewith.


Now my questions… should we tell the bank to stuff it and allow the adversarial hearing, of which, I would only think our risk is $17k??????

Or try and negotiate some more on the terms listed above???? Or just pay it and be done. Note, 10k is my entire savings.

Thanks for any thoughts…

[ttg1]

What is the basis for the banks objection? I don't understand why you would settle with them for any amount. To me the settlement agree reads like a shakedown effort. They get 10K from you but still retain all their rights and can continue to object later because of the extension. Say what???

727(a)(6)(A) reads "the debtor has refused, in the case--

(A) to obey any lawful order of the court, other than an order to respond to a material question or to testify;"

How does that apply to your situation?

[lichteda]

Newbie,

Our thoughts exactly...

But the risk is still large! 202k if the judge, who has a creditor friendly reputation, would rule in the banks favor.

But with everyone I have spoken with... same conclution.

[justbroke]

One word... estoppel. The bank already conceded to it being unsecured by filing such a claim in the Chapter 13. This is a really strange case!

[despritfreya]

When I see posts that start out like this one I, having seen just about everything that can go on in the bk area, am always wary of what the real story is. Nothing is ever quite as it seems, is it? My recommendation is that you come up with that $10k settlement and do it before you lose your right to discharge the balance of the $200k debt, or, worse yet, face criminal charges for bk fraud.

From your posting history you played with this system and have now been caught. Right from the start you admit you were squirreling money away.

"After we filed 13, I started to look for a rental home. . .I saved every penny from the mortgage payment avoidance. I was sitting on $30k by the time we "had to move out"..."

Those funds belonged to your creditors not you.

Apparently, instead of renting you decided to purchase. . .

"I did a couple of things. First, my motion included a withdraw from my 401k to use towards the house. . .Plan modification was approved to buy the house. No one knew we had the cash on had (sic.). And I pulled a little out of my 401k to make things look good."

FRAUD, FRAUD, FRAUD. You are lucky that this forum is anonymous. Maybe a referral to the DOJ is in order.

To add insult to injury. . .

"The 100% payback under 13 was met BEFORE the bank converted their secured claim to an unsecured (deficiency claim post foreclosure no doubt). So the 13 trustee distributed about $40k. . . and began closing the 13 (6 months into the plan). The bank amended their secured claim to a $202k unsecured and objected to the closing. The 13 Judge ruled that "plan would pay what the plan will pay". Meaning that all remaining 13 payments would go the bank. This was 2 years ago... so all unsecured was paid at 100% except the bank. Sooooo when we filed a motion to exclude 2010 tax refund the bank and the Trustee objected and wanted to rework all the schedules... As such, we converted to a 7"

Keeping the refund for yourself.

The point of fact is that your conversion stinks of bad faith. Pay the $10k you agreed to pay back in July (within 90 days) and be done with it. Pull the money from that 401k you have.

Sorry to be so blunt but I really dislike it when “bad” people try to get the good folks of this forum to feel sympathy.

Des.

[justbroke]

You should have been a detective Des. I haven't been following this story but this post did appear to be a "strange" case. If fraud can be proven, this debtor could face actual jail time for bankruptcy fraud. Perhaps $10K is worth making this go away, but I still don't like that one could buy their way out.

[lichteda]

Des,

The bluntness is ok by me. You have read things wrong. The money saved was approved by the trustee from the start of the 13. We negotiated this. Also, the only creditor remaining is the bank, of which we paid for 15 years on the house... we are talking about their profit. We have not played the system at all. In fact, we qualified for the 7 to begin with and followed bad advice to the 13. Additionally, I've lost my job and have no in come. you would do well to understand things completly before you are so blunt.

This bank has shown now limit in there agressivness, we have lived through 2.5 years of hell.

[lichteda]

Additinally Des, everything we have done was fully disclosed to the court and approved. My earlier points were to show that you have options while in BK and not to lose hope.

[despritfreya]

You should have been a detective Des. . .Perhaps $10K is worth making this go away, but I still don't like that one could buy their way out.

But, JB, I am a "detective". The Firm I work for takes over cases where the debtor is a "bad" person. A good portion of the practice is dedicated to "damage control". This requires me to do a lot of digging into the debtor’s financial life (with or without the debtor’s help). And, as it relates to buying their way out. . . it happens all the time. Can't tell you how many cases we have settled where the debtor "buys" the right to a discharge. Is it right? Probably not. But that is what settlement is all about, be it with the Trustee or a creditor.

Des

[despritfreya]

Additinally Des, everything we have done was fully disclosed to the court and approved. My earlier points were to show that you have options while in BK and not to lose hope.

Of course, it is possible that I misinterpret what is going on. But, you have admitted that you hid money from the court and your creditors. So, unless you were "puffing" when you stated, "No one knew we had the cash on had (sic.)", I have to assume there is much more going on here than meets the eye.

Could be wrong, but I only call them like I see them. Regardless, you will be better served by settling. Remember, the creditor wanted $17k and you countered with $10k. The creditor has accepted your counteroffer. Pay it.

Des.

[justbroke]

Des, yes, I have heard that you could "buy your way" out of certain things in bankruptcy. I know that Trustees do this all the time, through negotiations with the debtors. Had I put on my thinking cap, I would have realized that people buy their way out of Adversary Proceedings (APs) all the time. I mean, the defendant in my AP bought their way out by settling... while admitting no guilt, of course.

[newbie2]

DANGER WILL ROBINSON: I don't have anything to add to your questions, but I did want to send you a caution flag for what it is worth. You've put so much information out here in this forum that it was quite easy to find your case on Pacer. If I could find your case, think about what your creditor (who is really putting up a fight) could find in your words on this forum if they so chose to do some digging around. Don't let anything you say here come back to bite you in the tush, like the things you wrote in this thread: http://www.bkforum.com/showthread.ph...and-bankruptcy

[newbie2]

Additinally Des, everything we have done was fully disclosed to the court and approved. My earlier points were to show that you have options while in BK and not to lose hope.

One more last thing from my soapbox, and then I'm done: If you want us to take you seriously, then don't take us for fools. Your words in that earlier thread: "Once you determin you are going to have to move, find a land contract, make an offer contingent on court approval... (you will have to explain were the down payment comes from). So get close to the seller... (I have several idea's if you need them)."

Sounds like a contradiction to me..would love to know what you meant by "get close to the seller" and the sly "I have several ideas if you need them".

[despritfreya]

. . . I did want to send you a caution flag for what it is worth. You've put so much information out here in this forum that it was quite easy to find your case on Pacer. . .One more last thing from my soapbox, and then I'm done

I too will get off the soapbox with this last comment. Newbie's points are well taken. A review shows quite the history of amending the Plan, dealing with objections and then stipulating with both the Trustee and this creditor (prior 2nd on foreclosed property) - hence the argument by the creditor that OP has wilfully failed to obey court orders. While OP was playing games I believe the attorney who represented OP needs to take some responsibility for what transpired. Clearly debtor's counsel had no control over the client and allowed the diversion of money belonging to the creditors. This gamesmanship should never have happened.

Des

[justbroke]

I must say, that this is the most interesting case I have ever read. Diverting funds from a Chapter 13 by avoiding a mortgage payment? How on earth would ANY Trustee allow the accumulation of $30K in cash from such a strategy?

No one knew we had the cash on had (post BK13). And I pulled a little out of my 401k to make things look good.

It's comments like this that make me cringe at the thought that this has played out as such. Perhaps the Chapter 13 Standing Trustee was asleep. Perhaps the debtor's attorney didn't know the game being played.

In a Chapter 13 plan which pays less than 100% to allowed unsecured creditor claims, the debtor must surrender all disposable monthly income to the custody and control of the Trustee. I don't see how you get around that... and it's not bad faith.

I think that the Chapter 7 case is headed for a showdown with the United States Trustee (UST). I wouldn't be surprised that the UST to intervene and seek to dismiss.