Dismissing 7 to refile later "HELP"

[jcbutta]

Hello all. I know this may be a strange question but what are the consequences for dismissing Chapter 7 Bankruptcy myself. To make a long story short, my attorney botched my paperwork and now the US Trustee is asking for all of this paperwork and more than likely will try to get me in a 13 because of my high car payment. I wanted to start over from scratch, preferably with a new attorney, so I can get all my ducks in a row and sell my vehicle. Is there an issue for doing such a thing or am I forced to go through the bankruptcy even though all my affairs are not in order? Will this botched attempt at chapter 7 haunt me when I refile? Any help is appreciated.

[justbroke]

The best strategy is to wait for the United States Trustee (UST) to proceed with a Motion to Dismiss and allow it to dismiss (without prejudice). Then refile. If you let the UST do this, then you can "ride" the automatic stay for the entire period until the case is actually dismissed.

Remember, that a Debtor does not have an absolute right to dismiss a Chapter 7 case. You would have a "chance" to convert, but the Panel Trustee and the UST could ask the court to let the Chapter 7 case play out and liquidate your property. Typically, the forced liquidation only happens when there are some serious bad faith or fraud issues, so I wouldn't worry about them. However, you can only "Motion to Voluntarily Dismiss Chapter 7" but there is no guarantee that you'll be allowed.

This is why I suggest that you just let the game play out, and let the UST make the decision for you.

You mention a "botched" Chapter 7 and mention selling your vehicle. What is the "real" issue? Perhaps you're looking at this entirely wrong. In your other post you were worried about equity in the vehicle. That should have been EXTREMELY clear up front and your Schedules would have reflected this.

Here are your hurdles for dismissing and re-filing a Chapter 7.

• If you are granted a dismissal, after motion for a voluntary dismissal, the court could impose a 180 day "cooling off" period where you can't file another case (a dismissal with prejudice)
• If you are granted a dismissal without prejudice, you can immediately refile, but you must do the so-called first day motions in order for the automatic stay to "stick" (otherwise it expires in 30 days from filing)
• If the Panel Trustee (Tee) or UST thinks that you're trying to hide the equity, the Tee could just object to the dismissal and liquidate your Estate anyhow. You'd get your discharge, but you would have to liquidate the vehicle to strip the equity or you would need to somehow "buy back the equity" from the Tee. In other words, give the bankruptcy Estate (the Tee) some part of the $10K.
• If you are discharging a lot of debt, let's say more than $400K worth of debt as an example only, losing $10K should be WELL worth losing the vehicle (seriously, think of it as settling for 2.5 cents on the dollar).
• If you don't comply with the 11 USC 521 request for production of those items that were requested, this could further exacerbate not only a motion (request) for a voluntary dismissal, but could be the thing that frustrates the UST and Tee and they oppose any dismissal unless it's with prejudice to filing within 180 days.

It really reads, at least to me, as though you filed a marginal Chapter 7, and because you are an over-the-median income filer AND have a significant vehicle payment, the UST does not find you to be "needy" of a Chapter 7 discharge. There is really nothing you can do to fix that! In fact, if you dismiss and sell the car, you don't have enough car payments to get your disposable monthly income (DMI) into the range it needs to be to achieve a discharge. It also reads that the UST believes that you're not even paying your mortgage, so you don't have this expense.

I am not implying that you should have known these things, but over-the-median income filers with significant unsecured debt (over $100K) are going to be put through the ringer. While such a filer can receive a discharge in a Chapter 7, they are subject to more scrutiny, and your case had every red flag that I could think of (from the little I have read). (Red flags... over $100K in unsecured debt ($440K+ actually)... car payment over $517/month ($900/month actually plus another vehicle)... high income debtor (over-the-median)...)

I think that your business operations also make it difficult for the UST to get a feel for your true financial picture and that is the reason for the Production of Records.

I'm surprised that you're not a non-consumer filer? If you were, the UST would be hard pressed to go for a 707(b) dismissal for abuse.

Bottom line, you need to comply and find out if this request for production of records is nothing more than the UST confirming what you have on your Schedules. It is quite common in business cases. However, and again, I wonder why you're not a non-consumer filer if you have a lot of business debt.

[jcbutta]

Thanks for your insight. I consulted with my attorney and he advised me that the prudent thing to do is request for dismissal, sell my vehicle for something with lower monthly payments and re-file after 6 months. My attorney advised me that the monthly payment should be no more than $500/month. Now my question is this: should I finance or lease?

[TXskyblue]

Will you still qualify for a 7 with the lower payment or will you be filing a 13?

Since you have time, you may be able to reduce your income. I didn't work a minute of overtime for 6 months which helped tremendously with my chapter 7.

I've said on here before that I don't believe leasing is a good choice for almost anyone. Is there a reason you are considering leasing?

FYI: My car payment was over $500, but now by a whole lot (less than $550). Nothing was said about it, although I think you will be under more scrutiny due to your prior filing.

If you are having trouble qualifying for a 7, remember there are lots of expenses that are considered acceptable. I didn't have to do it, but I priced life insurance. I would have been able to increase my allowable expenses by something like $100 a month just for life insurance. There's no law that says you must keep your life insurance after you are discharged.

[jcbutta]

I am considering leasing because if I purchase I would be putting the equity from my current vehicle down on the new vehicle. If I do that, I believe that I will have some equity in my vehicle when I finally file, which the trustee would most likely want. If I lease, I can put away the equity from my current vehicle and use it elsewhere.

As far as my re-filing, my income will be dramatically reduced, hence me being able to qualify for 7.

[jcbutta]

I just want to make sure that the UST will not give me a hard time on a lease as opposed to a purchase.

[keepmine]

I am considering leasing because if I purchase I would be putting the equity from my current vehicle down on the new vehicle. If I do that, I believe that I will have some equity in my vehicle when I finally file, which the trustee would most likely want. If I lease, I can put away the equity from my current vehicle and use it elsewhere.

As far as my re-filing, my income will be dramatically reduced, hence me being able to qualify for 7.

You do realize Fl. allows a $4K exemption for equity in an auto?

[justbroke]

You do realize Fl. allows a $4K exemption for equity in an auto?

This is only partially the case.

Florida allows $1K under F.S. 222.25(1), in one vehicle. You do get the $4K "unused homestead exemption" (Florida Constitution Article X Sec 4) by means of F.S. 222.25(4). Joint married debtors can double.

Additionally, there is another general wildcard of $1K under Florida Constitution Art. X Sec 4. Joint married debtors can double.

If you have furniture, household goods, electronic equipment, computers, televisions, etc, that's a lot to fit into the $1K general wildcard. If you are not claiming a homestead, you get that extra $4K, but it doesn't go far if you have a decent sized home or otherwise nice things.

[jcbutta]

This is only partially the case.

Florida allows $1K under F.S. 222.25(1), in one vehicle. You do get the $4K "unused homestead exemption" (Florida Constitution Article X Sec 4) by means of F.S. 222.25(4). Joint married debtors can double.

Additionally, there is another general wildcard of $1K under Florida Constitution Art. X Sec 4. Joint married debtors can double.

If you have furniture, household goods, electronic equipment, computers, televisions, etc, that's a lot to fit into the $1K general wildcard. If you are not claiming a homestead, you get that extra $4K, but it doesn't go far if you have a decent sized home or otherwise nice things.

Thanks Justbroke, that is more in line with what my attorney told me. Back to my original question: do you think I should lease or purchase?

[LadyInTheRed]

I think you should purchase the vehicle, but don't put so much down that you have non-exempt equity. If you have cash left, you can use it to pay attorney fees and living expenses before you refile.

I hope you are going to provide the information requested by the trutee and wait until the trustee actually files a petition for dismissal of your Chap 7. The trustee may be satisfied with the information you provide and allow a Chap 7 discharge.