Almost there!!

[southernbelle]

I paid the atty. in full yesterday, did my online counseling today. I'm almost done with all of the other paperwork req'd.

I'm getting a bit nervous about reaffirming the house and having some last minute doubts about my voluntary retirement contributions. Since I don't have to take the Means Test, I qualify for chapter 7, but after reading the posts from getouttadebt and his troubles with the US Trustee and voluntary retirement contributions, I'm worried.

My take home pay is about $1350 biweekly. $65 biweekly is mandatory retirement through my employer. Since I have no retirement at all right now, I'm voluntarily putting $150 biweekly into a separate plan Deferred tax plan. I started contributing about 2 1/2 months ago and don't know how it will be perceived.

I'm hoping not to have problems with the UST, but who knows. What if my case is forced into conversion to chapter 13? I don't make enough to fund a chapter 13 plan (I wanted to file 13 to deal with the taxes anyway but owe too much), what would I do then? Would I be SOL?

Does anyone else think my voluntary retirement contribution might cause some trouble? Oh, I also forgot to mention I'll almost certainly be considered an asset case since I have business assets in storage.

Any thoughts?

[phoenyx]

I assume you aren't taking the means test, because you qualify to be considered primarily a business debtor. Am I right on this?

Was the business a sole propriotorship, or was it a corporation or LLC? If the business was a corporation or LLC, are those business assets still owned by the business?

[southernbelle]

Nope, you're right I don't have to take the Means Test since almost all of the debt I have is from the business. I'm over the median for my state and have disposable income left over (if I did take it). I'm still kinda freakin' out since the voluntary amount I put into retirement might be questioned, but I do remember another poster that was in a similar situation that said that because it was a business chapter 7, additional expenses were allowed, but I don't know if that applies to me since the business is closed.

The business was a sole prop., so I know I'm personally responsible for everything. The assets are mine I guess since I closed the business, took pictures of everything and put them in storage. I didn't sell anything off, I just had a friend with a similar business that took some of the stuff and paid the leases off on them. No money changed hands, but I documented what she took. She was basically helping me to pay the lease companies before they sued me for the balance owed.

It may sound strange, but I tried pushing HARD to get put into a Chapter 13, but I don't make enough money so I'm stuck between a rock and a hard place. If everything doesn't go right with this 7, a 13 is next to impossible.

Believe it or not, I would have to get a 2nd job which brought in about $800 - $1000 take home or eliminate expenses like sell my house and move in with relatives to make a 13 plan work. It's a bit extreme, but when the alternative is dealing one on one with the IRS and tons of other unsecured debt, I'll do what I have to.

Worst case scenario, if this 7 goes south, I'm gonna take extreme measures to try for the 13. A second full time job and selling my house. I don't want to trifle with the IRS, they have huge fangs. I won't ever find myself in this position again. This stinks.

[phoenyx]

First, your attorney will be the best person to talk through most of these issues with. I certainly understand posting questions on this forum to get ideas to go along with attorney advice (I do it all the time), so I have a few more things I would need to know befire I gave my opinion about some of these issues.

(1) What state are you in?

(2) Did you want to file a Chapter 13 to attempt keeping your house, or was it more to set up payment arrangements on your IRS balance?

(3a) Do you owe the IRS for income tax, or is it employment tax?
(3b) If it's income tax, if you don't mind saying, roughly what amounts are owed for each tax year?
(3c) What's the state of the balance owed to the IRS right now? For example... Are the returns filed? Have you entered an installment agreement, or signed any collections paperwork? Have they face-to-face interviewed you about the amount owed?

(4) If you don't mind saying, roughly what value are the remaining business assets? (Roughly value at what they would be sold at, not what you paid for them or their current value on your books.)

(5a) Before your friend took some of the assets, had you paid down a bit of the lease amount?
(5b) Did you get compensation for any paid-down amount on the lease, or did you take nothing since your friend was getting you out of the rest of the balance?
(5c) Roughly when did this transfer take place?

[southernbelle]

First, your attorney will be the best person to talk through most of these issues with. I certainly understand posting questions on this forum to get ideas to go along with attorney advice (I do it all the time), so I have a few more things I would need to know befire I gave my opinion about some of these issues.

(1) What state are you in? Louisiana

(2) Did you want to file a Chapter 13 to attempt keeping your house, or was it more to set up payment arrangements on your IRS balance? It was more important to pay the IRS and the other taxes owed without incurring further penalties and interest.

(3a) Do you owe the IRS for income tax, or is it employment tax? I owe for payroll taxes which are non-dischargeable, but I have over $150k of other dischargeable business debt that can be helped with a chapter 7.
(3b) If it's income tax, if you don't mind saying, roughly what amounts are owed for each tax year? N/A
(3c) What's the state of the balance owed to the IRS right now? For example... Are the returns filed? All returns are filed and the account is being sent to a local agent in my city. I was told by 2 different atty's to file the chapter 7 then file an OIC with them after the discharge.Have you entered an installment agreement, or signed any collections paperwork? No installment agreement or anything yet, in fact I spoke with the local IRS person and she hasn't gotten my case yet, but didn't want to do anything until she received the paperwork. I don't want to have them file a lien, that's why I'm filing my chapter 7 this week. Have they face-to-face interviewed you about the amount owed? Not yet, she wants to wait for the paperwork. Everyone says they are pretty nice to deal with, but with payroll taxes, I don't think they'll be as accommodating with me.

(4) If you don't mind saying, roughly what value are the remaining business assets? The assets are tables, chairs, racks, a kettle, small kitchen items and misc. stuff roughly worth about $3k-$4k maybe (and that's pushing it depending on where it's sold). Mostly junk that I would gladly give away, throw away or sell on ebay if it weren't for the BK. I don't own anything else that wouldn't be covered by the exemptions except a treadmill.(Roughly value at what they would be sold at, not what you paid for them or their current value on your books.)

(5a) Before your friend took some of the assets, had you paid down a bit of the lease amount?The leases were current until I closed the business, then I had no money to pay them. My main concern was to pay those off or have them after me for those balances as well.
(5b) Did you get compensation for any paid-down amount on the lease, or did you take nothing since your friend was getting you out of the rest of the balance? I didn't see a dime of the money she paid them, in fact I gave her the number and she called them directly and paid with her cc over the phone. I called later and asked if the balance was paid off and they said yes, and sent me a letter showing a zero balance.
(5c) Roughly when did this transfer take place?The transfer took place about 3 weeks to 1 month after the business closed which was in July - August 2007

Thanks for the help. I'm making a long list of things to remember to ask or tell my atty. Monday and this is very helpful. I don't want to end up in a situation where I'm defending myself after the fact and want it all out in the open ahead of time.

[phoenyx]

As for your worries about being forced to convert to a Chapter 13, there are a few things to look at. You said you are over the median state income level, so you don't immediately qualify for a Chapter 7 right there. The next thing they will look at is if your actual income shown on your bankruptcy Schedule I is significantly higher than your expenses shown on your bankruptcy Schedule J. If so, they could force you to convert to a Chapter 13. I know that business debtors are given more leeway about qualifying for a Chapter 7, such as not going through the means test, so you might squeek by even if you are worried you might not qualify. Again another thing to discuss with an attorney familiar with your case.

You'll have to go through Schedules I and J in detail with an attorney to see where you come out. Since you said you looked hard at qualifying for a Chapter 13 repayment plan and couldn't work it out, as long as your math is right, I think the court should wind up agreeing that you can't qualify for a Chapter 13 repayment plan. But, again, your attorney should be able to double check your math to see for sure.

The other thing to look at is this post regarding Chapter "20" bankruptcy. That's where a debtor files a Chapter 7 to discharge whatever debt they can, then files a Chapter 13 to enter a payment plan which helps with foreclosures and IRS debt. Chapter "20" (no such thing, just 7 + 13) was generally considered dead with the new law, but the post I mentioned shows that the 4th circuit court of appeals decided that a debtor isn't elligible for a discharge in their Chapter 13, but they can still file one if their repayment plan pays back all of their debts. This ruling involves a case in Maryland, so must be in a different court of appeals than you, and might be more than your attorney wants to fight, but it's another thing to consider if the IRS is a huge pain.


As for being an asset case, unfortunately it does look to me like Louisiana does not have any type of wildcard exemption to apply to your business assets. Furthermore, Louisiana doesn't allow you to consider using the federal exemptions which do include a wildcard exemption.

However, you do have a personal property exemption which includes things such as certain types of furniture/kitchenware, and also a tools of trade exemption which includes things such as certain types of tools/instruments/books. You will need to prepare a detailed list of all the business assets you have for your attorney. You and your attorney will have to put a justifiable value on each item, and try your hardest to see if you can put some of those assets under an exemption.

In the end, even if you have some non-exempt property, you might be classified a no asset case if it is a bunch of low value items that the trustee doesn't think they could sell for much -- it might not be worth their time, especially if you are able to exempt some of it. There just isn't a huge market for used small home furniture which sounds like the majority of the remaining business assets.


As for the IRS, it's very good that you haven't entered an agreement or signed anything besides the returns with them yet. (As I'm sure you know, don't sign anything without having a professional looking at it first.) As you already indicated, your best bet will be to file an offer in compromise or an installment agreement with them after your discharge. Although they can fight it a bit more, you might come out much better ahead under a Chapter 7 then! Depending on your situation, you might be able to negotiate an OIC to pay a lot less than what is owed. OIC's are complicated, and worth doing through a tax professional as well. I have some payroll taxes owed also, and you're right that they are non-dischargeable and harder to work with the IRS on.

Payroll taxes have a 10 year statute of limitation on collectability (like any taxes), but it sounds like you probably aren't much through that period yet.

Another thing you might want to look into is penalty abatement. Often if you can show that some of falling behind was outside your control, especially in hand with making an OIC or installment agreement, you might be able to get some of those waived which I am sure account for a large amount of your balance. Penalty abatement is another thing to work with a tax professional on.


As for the assets transferred to your friend, I'm not worried whether any of the money your friend paid flowed through you. What I am worried about is whether an argument could be made by the trustee that it was a preferential transfer. The good news is if this is the case, if you file a year after the transfer (so Jul-Aug this year) this should become a non issue. It would be a shorter period, but your friend might be considered an "insider" making the period a year. An insider is a relative or close business contact. General friends are not considered insiders, so it would depend on the nature of your relationship with this friend. I'm not sure how much these assets were worth, how much you had already paid on them, and how much your friend paid on them.

The situation that comes to my mind about the trustee causing a problem over it would be if the assets were worth a decent amount like $50,000, and if you had paid down $40,000 of the principal amount only leaving $10,000 principal owed. If your friend then took the item and paid the $10,000, the trustee could view this as you giving $40,000 equity toward your friend without getting anything back. It would depend on the exact numbers involved (another good thing to talk to your attorney about.)


Phew!

Good luck, and let us know how the attorney meetings go!

[biotechsolution]

southernbelle....being has you're business debtor you should get a fair amount of wiggle room on your I and J.

I had a 18K/year school tuition expense for our 12 year old, we had the expense since she started in kindergarden. In addition a 800-1K/month 401K contribution.

I can't stress enough to take a pro-active stance with the bk trustee and the UST. I contacted the UST 2 days after filing to ask if I need to file a motion to be excused from filing 22A and 22B. Because if you go by the letter of the law it states no one is excused. I also was up front about the tuition costs and asks flat out if it was going to be a problem and if we were going to have to file an AP to have the judge decide.

And all this was done 'pro se'

I'm sure there are many expenses you can use to make your I and J end up at 0.

[southernbelle]

Thank you guys for taking the time to answer. As a result, I have a laundry list of items to ask my atty tomorrow morning. He's got most of the info. he needs to file the paperwork, but I need to get proactive like biotech said. Biotech, how did you go about contacting the bk trustee and UST? I'm pretty familiar with PACER and know how to track down the bk trustee, but I thought we don't really know who the UST assigned to the case is? Should I do that myself or have my atty do this? I have plenty of expenses I can use to make the I and J very very low but not quite 0 since I don't have kids and live alone.

Phoenyx, thank you sooooo much for taking what I'm sure seemed like an eternity to respond. I want to take some time during the 60 day waiting period during my chapter 7 to meet with some tax atty's in my area to get a better idea of what to expect from dealing with the IRS and the best way to handle the tax issue.

My state stinks. There aren't many exemptions and no wildcards, so I'm pretty sure I'll be considered an asset case because most of the items I have are "small wares", but 2 or 3 of the items might be worth taking a second look at if the trustee was really picky.

As for the preferential transfer of the business equipment. This "friend" is a person with a similar business that did some work with/for me in the past. We didn't hang out on the weekends or anything, I just needed to pay off the leases and she just happened to want the equipment to enhance her own business (I think she kinda felt sorry for me) and since there was about $2k left on the leases, she was willing to pay it off. Keep in mind, this business was pretty small and the equipment wasn't high end. I bought 90% used off ebay or from a local restaurant equipment supply co. The value of the stuff she paid off wasn't worth much. I documented what the stuff was and hopefully the trustee won't make much of a stink about it since at the time, I was trying to keep them from suing me and couldn't afford to send the equipment back to them which is what they wanted. I just figured they would have someone local pick it up and "reposses" it, but they wanted me to foot the bill just to get it back to them. One trucking co. quoted me a price of $1100. If I had that, I could have just paid them off. It was nuts.

I tried hard to get into a Chapter 13 (I know crazy right?), but 2 different atty's told me straight out that I wouldn't qualify.
The atty. I'm using now said we could try a non-dischargeable chapter 13 after the 7 discharge as an OIC for the taxes using the disposable income I have available to fund the plan. He said this would be a first for him, but it would be worth a try. I've never heard of this before, and asked if the court would even approve of a plan like that, but he said the court can't object to it, only the creditors can. I was under the impression that the plan had to fund at least 100% of secured or priority debts. I'm asking him about this again, but it sounds like a wasted attempt at a chapter 13 if you ask me, but he said it's a way to ask them to accept the amount funded through the plan for 5 years and consider the debt paid in full for that amount. Have you guys ever heard of something like that?

Thank you guys again for the great advice and the time to respond. It's helping me to draft more questions to ask before I file this week.

[Flamingo]

I paid the atty. in full yesterday, did my online counseling today. I'm almost done with all of the other paperwork req'd.
I'm getting a bit nervous about reaffirming the house and having some last minute doubts about my voluntary retirement contributions. Since I don't have to take the Means Test, I qualify for chapter 7, but after reading the posts from getouttadebt and his troubles with the US Trustee and voluntary retirement contributions, I'm worried.
My take home pay is about $1350 biweekly. $65 biweekly is mandatory retirement through my employer. Since I have no retirement at all right now, I'm voluntarily putting $150 biweekly into a separate plan Deferred tax plan. I started contributing about 2 1/2 months ago and don't know how it will be perceived.
I'm hoping not to have problems with the UST, but who knows. What if my case is forced into conversion to chapter 13? I don't make enough to fund a chapter 13 plan (I wanted to file 13 to deal with the taxes anyway but owe too much), what would I do then? Would I be SOL?
Does anyone else think my voluntary retirement contribution might cause some trouble? Oh, I also forgot to mention I'll almost certainly be considered an asset case since I have business assets in storage.
thoughts?

The $65 biweekly "mandatory" contribution required by your employer is would be considered as income to you (no contribiution to a retirement plan is mandatory unless there is some sort of language in a contract you signed at hire). The $150 (either minus the $65 or plus the $65, one can't determine from your posting) vountary contribution is also considered as income to you. You need to go over this with the attorney you just hired so he is aware of what you are doing so there are no surprises.

[southernbelle]

The $65 biweekly "mandatory" contribution required by your employer is would be considered as income to you (no contribiution to a retirement plan is mandatory unless there is some sort of language in a contract you signed at hire). The $150 (either minus the $65 or plus the $65, one can't determine from your posting) vountary contribution is also considered as income to you. You need to go over this with the attorney you just hired so he is aware of what you are doing so there are no surprises.

I'm definitely going to make sure the atty. is VERY clear on this one because of the amount.

The $65 biweekly retirement amount is mandatory since social security is not deducted from my paycheck. I work for the state and that's how they do it. It is taken out in lieu of social security (Hope that makes sense).

The $150 biweekly is what I contribute in addition to the $65 biweekly so it's actually $215 total biweekly to retirement. I have no retirement savings, so I was just concerned because I didn't know if that was too much to contribute and I'm just trying to make sure I don't have to work until I'm 100.

[Flamingo]

I believe I understand what you are stating as to the $65 and SS and if that is the case, it might be considered as a payroll deduction. Discuss in full with your attorney. As to the $150. Times that $150 by 26 and that is what could be distributed extra each year to creditors if you filed a Chapter 13. Most people have to stop contributing to a retirement fund when they file Chapter 13 because that is income that can be disbursed to creditors. Just discuss everything in full and openly with your attorney. When you have to file BK, you need to worry about what is going on right now and not 30 years down the road. Get yourself out of this mess and start over. You can always save again when times are better. Know what is in your retirement account right now is exempt so make sure you keep it so it accumulates the most interest it can if you file a 13.

[southernbelle]

I believe I understand what you are stating as to the $65 and SS and if that is the case, it might be considered as a payroll deduction. Discuss in full with your attorney. As to the $150. Times that $150 by 26 and that is what could be distributed extra each year to creditors if you filed a Chapter 13. Most people have to stop contributing to a retirement fund when they file Chapter 13 because that is income that can be disbursed to creditors. Just discuss everything in full and openly with your attorney. When you have to file BK, you need to worry about what is going on right now and not 30 years down the road. Get yourself out of this mess and start over. You can always save again when times are better. Know what is in your retirement account right now is exempt so make sure you keep it so it accumulates the most interest it can if you file a 13.

AMEN!! Thanks Flamingo. I will remember that. I wish I could file a Chapter 13, but it's like I'm trapped between a rock and a hard place. Too much for a 7, but qualify because of the business debts and too little to pay all of the taxes through a 13. I wish I either made more money or could win the lottery and really have a fresh start.

[Flamingo]

Just remember one thing - it's not the end of the world and things do get better!!!!

[southernbelle]

I'm praying it does. I've been on an emotional roller coaster with this business thing. I finally divorced my ex (which was a huge obstacle for me) and now I have to deal with the BK. I hope I can get it all figured out because it's taking its toll and I'm ready to throw in the towel.

[phoenyx]

. . .
I tried hard to get into a Chapter 13 (I know crazy right?), but 2 different atty's told me straight out that I wouldn't qualify.
The atty. I'm using now said we could try a non-dischargeable chapter 13 after the 7 discharge as an OIC for the taxes using the disposable income I have available to fund the plan. He said this would be a first for him, but it would be worth a try. I've never heard of this before, and asked if the court would even approve of a plan like that, but he said the court can't object to it, only the creditors can. I was under the impression that the plan had to fund at least 100% of secured or priority debts. I'm asking him about this again, but it sounds like a wasted attempt at a chapter 13 if you ask me, but he said it's a way to ask them to accept the amount funded through the plan for 5 years and consider the debt paid in full for that amount. Have you guys ever heard of something like that?

Thank you guys again for the great advice and the time to respond. It's helping me to draft more questions to ask before I file this week.

Keep in mind, the reason you file the non-dischargeable 13 is to get the benefit of the automatic stay. In that respect, if you can work something out with the IRS (or other priority creditors), you may not need to do the 13. The reason you do the follow-on 13 is to deal with "uncooperative" priority creditor and to get the automatic stay. It is possible that you could work something out with the taxing authority that is more beneficial than filing chapter 13. So, in that respect, you have to analyze, from a financial perspective, which option is better, i.e. filing the 13 and paying the claims IN FULL, or possibly working out a longer payment plan, settlement, etc, with the taxing authority.

He's exactly right here. If you can get an OIC approved, you might be much better off than a Chapter 13. I do understand your point that getting $14,000 together to go along with the OIC would be difficult.

Also keep in mind that I think a Chapter 13 is more expensive to file than a Chapter 7. I'm not saying that your attorney would be trying to scam you, a "Chapter 20" might be benefitial to you, but they wouldn't mind the additional fees -- especially since if the trustee fights to dismiss the Chapter 13, the attorney would have to spend a lot of time fighting the dismissal, possibly even in appeals.