2004 Examination

[Mrslady2004]

I filed chapter 7 bankruptcy in November 2021. During the 341 meeting, the UST trustee asked some questions about a bonus that was on my paystub. After submitting some additional requested information, the UST trustee filed indicating there was no evidence of abuse because I still qualified for a Chapter 7. The chapter 7 trustee also filed that my case was a no asset case.

Fast forward to February (a week before the deadline to file an objection), the UST filed a motion to extend time because I am due another bonus in March and they didn't want to discharge the case prematurely if I had the means to pay. My bonus is under $10,000. I sent my bonus information to my lawyer and they sent it to the UST. Today I received a message that they are asking for a 2004 Examination next month. Should I be worried? Are they going to try to take my bonus? Will they try to cancel my bankruptcy? I'm freaking out.

[justbroke]

You have a case that has been open for a year without a discharge? That's very odd... or did you mean November 2022? Who ordered the Rule 2004 Examination, the UST or the Trustee. There is no way to tell what they want to ask you. Did they motion to extend the discharge, or just motion to extend time to file an objection to discharge? Those are different things.

If it's the UST, the UST is trying to determine whether you deserve a discharge under Chapter 7 or face dismissal. It reads as though your numbers were borderline to start and the original bonus alone was enough to get the UST interested in your case. Unless the UST tells your attorney what they want from you, assume that the UST is performing its primary duty. That primary duty is to keep people from receiving a Chapter 7 discharge that don't qualify for such a discharge. You can always convert to a Chapter 13.

You'll have to ask your attorney because they are closest to the issue. The timeline is weird but the UST seems to have changed it's mind about whether the case is an abuse of a Chapter 7.

[Mrslady2004]

My apologies, it was November 2022.

The UST filed a motion to extend time to file an objection to discharge. The chapter 7 trustee already said it was a no asset case.

[justbroke]

No asset case will just mean the Chapter 7 Panel Trustee will be excused because there are no assets to distribute. However, you have piqued the curiosity of the United States Trustee (UST) regarding your income. I don't know why they want a Rule 2004 Examination to just figure out if that bonus (or bonuses) are enough to push you out of a Chapter 7 and into a dismissal or conversion to Chapter 13.

Are you single? Do you own a home?

[Mrslady2004]

I'm separated and I own a home with my soon to be ex, but i'm only staying in the home until I get out of the bankruptcy. I can't move right now because of my credit status and didn't want to move the kids in the middle of the school year. He moved out until the kids get out of school and then I'll be leaving because it's too much house for me to maintain on my own. We don't have a formal child support order. He gives me money from time to time and all this was provided to the UST when they came to my 341 meeting.

Why would he file no abuse and he already knew about my bonus, and then file the extension. It makes no sense. Nothing has changed.

[justbroke]

I can't go to what the UST is thinking, but my thought is that you are still married and have the same physical household. Perhaps the UST originally believed that this was some other arrangement (e.g. two households maintained by a married couple).

The UST can, in fact, find your case not to be an abuse under 11 USC 707(b)(2). but absolutely can come back later (up until the last day to file a dischargeability complaint) under 11 USC 707(b)(3)... known as the Bad Faith and Totality of Circumstances objections. So the UST seems to have done the right thing for 707(b)(2), but see a new major chunk of income come in, and now want to look at the totality of circumstances, 707(b)(3).

Please know that from what I've seen here on BKForum, 707(b)(3) objections are rare, but they are possible (your case in point). This usually happens when the UST looks back at the entire situation... especially after a bunch of money comes in after filing but before discharge. Winning the lottery, right after filing and before discharge, has a similar consequence. The money is not property of the bankruptcy estate, but the UST can consider that income in "totality" of everything else. This is what has happened here.

It's unfortunate but I hope that the UST decides that there's nothing to see here. I'm now guessing, totally guessing, that the UST wants to know your living situation at the 2004 Exam.

If you want, I can redact some of what you posted, but I see the picture more clearly now. (Just let me know.)

[Mrslady2004]

Yes please. This is helpful.

[Mrslady2004]

Thank you

[Mrslady2004]

Would he take into account my current situation? I.E, I have to pay $10,000 college tuition for my son and I have damage to my home from a burst pipe that is currently causing a financial strain?

[justbroke]

Would he take into account my current situation? I.E, I have to pay $10,000 college tuition for my son and I have damage to my home from a burst pipe that is currently causing a financial strain?

I can't say to what extent the UST cares about future one-off expense -- such as future medical or educational expense -- with respect to a Chapter 7. Remember, a Chapter 7 is a snapshot of your financial condition on the day in which you filed. While the "totality of circumstances" (mostly) looks past the filing date, they won't look too much towards future expense when it comes to that type of objection.

At least you get a Rule 2004 Examination and I suppose you can explain it there. The exam is more like a deposition and your attorney will walk you through and prepare you for the exam. The Rule 2004 Exam could just be to get more documentation, but a deposition is usually taken under oath.

I can't say what the UST will ask you to produce (documentation) or ask you under oath (questioning). I'm not an attorney so I can't give you advice on how to approach this. Your existing attorney is your best resource. I don't know if your attorney is going to bill you additional hours for the 2004 Exam or if that's already included in your fee arrangement.

I do, though, hope this is just a bump in the road and the UST finds that you deserve a Chapter 7 discharge, and doesn't force you into a Chapter 13.

Adding... funny story. My Chapter 13 Trustee was asking, on the record in front of the judge, when my 23-year old stepson was going to graduate (since he was living at home and I was supporting him 100%). My response was priceless: "I have the same question!" The Trustee chuckled, the judge laughed, and we moved on. So it can depend on many factors and these are professionals that can show their human side at times. (My stepson graduated at 27 years old. He says many people go to college for 8 years. I retorted, "yes... they're called doctors.")

[Atlanta7]

I tried to send you PVT message with my case details. but it wont let me.