filed TUESDAY, but investigation?

[May2014]

We filed on Tuesday with a $500 shortage each month because of an investment property. The trustee has opened an investigation because we haven't been paying the mortgage on the property (non-paying tenants, you know), so it might not be considered an expense. Our lawyer thought we may have to convert to a 13, but he hasn't heard back yet from the trustee. My credit report (Sunday) shows one credit card discharged due to chapter 7 (balance at $0 now), and one car closed with a denotation of charge off/collections AND payment plan.

What does this mean? That the 7 stays? That my credit report will change if we are forced into a 13? And the plan was to reaffirm our cars, one home, and student loans...so what does this mean with the car being "closed?"

Sooooo many questions!!!

[Pjmax]

I can't comment on the investigation part, but your credit report is reflecting the notice of bankruptcy that was sent to your creditors when you filed. Your credit report has nothing to do with the status of your bankruptcy.

[justbroke]

First, it is the Office of the United States Trustee's (UST's) job to make sure that your expenses are accurate and you are "deserving" (their word) of a Chapter 7 discharge. If you are over-the-median and have some questionable expenses, the UST will investigate (research) and determine whether they will file a Motion to Dismiss due to an abuse of the system. If that happens, you can fight the UST and prove that the expense is legitimate, or you can convert to a Chapter 13, or allow the case to dismiss.

Second, please do not worry about your credit reporting. It is going to go through all sorts of machinations during this time. It is highly likely that you will eventually need to dispute items to get it reporting "correctly". Almost all creditors will change your accounts to $0 and "Included In Bankruptcy" (or "Wage Earner Plan" for a Chapter 13). Some of these companies may also list them as charge-off or sold. If you convert to a Chapter 13, your reported bankruptcy will just change to a Chapter 13 (if you dispute the entry). For now, please don't worry about your credit report or your credit.

On another note... the Trustee already filing an investigation within 3 days of filing seems strange to me. Perhaps this is just the "normal" random audit that occurs in a small percentage of cases. If you were randomly selected for audit, this may be your attorney's concern... that they find this small oversight. I can't tell you what the outcome will be.

[LadyInTheRed]

A random audit is the first thing that occurred to me too.

And the plan was to reaffirm our cars, one home, and student loans...

Why are you reaffirming? It is rarely a good idea to reaffirm a mortgage. Don't reaffirm underwater car loans. You can continue to make payments and keep the home and cars. There is no point in reaffirming a student loans because unless you petition to have them discharged due to hardship, they won't be discharged any way.

[May2014]

Does an audit delay the case? Right now, our meeting of creditors in slated for June 30. Is it possible to convert (if needed) and lay out a plan by then? I'm guessing that since this is a Chapter 7 forum, it might be hard to find an answer to that...

As far as reaffirming goes...I don't know why we're doing it. It's what our lawyer put into the paperwork. Ultimately, we can afford the mortgage, car payments, and student loans. It's the minimum credit card payments and the eventual deficiency on a short-sale/foreclosure that we needed protection from. Maybe he figured he'd give us those loans back to start rebuilding our credit from? I have to believe that he knows what he's doing...

[justbroke]

By the way, this is really an "all things bankruptcy" forum -- BKForum. Which sub-forum area a question is posted, just keeps everything organized and the context in which a question is asked, can be readily determined by the forum area.

Does an audit delay the case? Right now, our meeting of creditors in slated for June 30. Is it possible to convert (if needed) and lay out a plan by then? I'm guessing that since this is a Chapter 7 forum, it might be hard to find an answer to that...

An audit has no delay on the case. The independent auditor may contact you or your attorney and seek additional information or ask you to answer some questions regarding your petition. They are looking for integrity in the paperwork. A conversion will not affect the audit. If you convert, it is as if you filed a new case -- albeit the filing date is the same as the date of the "converted" case.

I would not worry about conversion at this point.

As far as reaffirming goes...I don't know why we're doing it. It's what our lawyer put into the paperwork. Ultimately, we can afford the mortgage, car payments, and student loans. It's the minimum credit card payments and the eventual deficiency on a short-sale/foreclosure that we needed protection from. Maybe he figured he'd give us those loans back to start rebuilding our credit from? I have to believe that he knows what he's doing...

I may know why your attorney put it on your paperwork. It is placed on your Statement of Intentions (SOI). In many Districts, you cannot use the expenses of secured property if you are going to Surrender (not reaffirm) the property! So, when it comes time to filing out reaffirmation paperwork, you either tell your attorney (at that time) that you no longer with to reaffirm or, in many cases, the creditor never sends reaffirmation paperwork anyhow!

[LadyInTheRed]

Maybe he figured he'd give us those loans back to start rebuilding our credit from? I have to believe that he knows what he's doing...

Justbroke explained why your attorney indicated that your intention is to reaffirm. I want to add that reaffirming would likely not help in rebuilding credit. From what I've read here, many lenders do not report to credit agencies after BK even if you do reaffirm the loan. Besides, even if they do report, rebuilding credit would be a stupid reason to reaffirm a loan.