United States Trustee is prepared to argue that my chapter 7 filing is abusive

[optimist]

I've been holding my breath since the 341 meeting. The meeting was adjourned for some other documents (nothing out of the ordinary), but my lawyer and I felt it went very well. There was no presumed abuse from the local trustee, but today I got word that the United States Trustee is prepared to argue that my chapter 7 filing is abusive when considering the totality of the circumstances.

I have 3 options accd to my atty...

1. Fight the trustee in court in lawsuit fashion (discovery phase, being on the stand etc.

2. Dismiss then refile later (after a few months showing less income)

3. Convert to ch 13.


Has anyone else had this happen to them and what was your experience??

-Rob

[laurannm]

Can you give us more details? What exactly is the UST basing their arguments on?

When you say you were adjourned, do you mean that the UST showed up at your 341 and your 341 was continued in order to gather documents requested by the UST?

[optimist]

the ust did not show up at the 341.

the local trustee needed to know about a lawsuit that I'm involved in. He was hoping that I would have some $ coming to me...but most likely there is not too much (if any) expected from the lawsuit.

the following is from my atty:



We had a failing business, that we no longer have...
We had a full time nanny that we no longer have...
My income was pretty high 170K+, I'm in sales, now with the recession it's less.

by adjourned, I mean that the meeting was not closed..

[laurannm]

Thanks

I am not an expert with this, but from what the UST has listed that seems to be pretty standard from I have read and various cases I have seen. If you are surrendering the properties then the UST can make the case that those shouldn't be included as an expense on your schedule J, since the schedule J is a current (or forward-looking) budget. Same deal with the business expenses.

401(k) and how a UST deals with it seems to be a hot topic these days. Some UST's argue that unless the 401(k) deduction is required in order to maintain employment, they are not allowed and are considered disposable income for your creditors.

I hate to sound negative about this, but given your very high income combined with the issues the UST listed above, you might have a tough time staying in a Ch 7.

Make sure when you submit your revised budget that you are accounting any and all expenses (including all of the little stuff not necessarily accounted foro n the means test).

Good luck!

[paintinrosesred]

Are you above the means test?
I'm sorry that this is getting rough.

[optimist]

Laurannm- what little expenses...I've thought about haircuts, medical co-pays, car repairs. Could you add some that I may not be thinking of....thanks.

paintinrosesred- I am fine with the means test, but as stated above the forward looking budget I guess I may not qualify for ch 7. Thanks for the sentiment....I realize that regardless of what happens, life goes on, I could worry and make myself suffer over it, or roll w it....I choose to roll with it.

Thanks for the replys...

[justbroke]

The 401(k) deduction are pretty much settled by several BAPs and the US Supreme Court. Voluntary payments to 401(k)s are protected!!! They have been since BACPA of 2005 (11 USC 541 (b)(7)(A)). It's in the SAME exact section of the code as "health plan" contributions!

I can't believe that there are Trustees still going after people's 401(k) contributions! There was a great case in Massachusetts that dealt with this (In re: KIMANZI MUSILI MATI -- 07-13323-JNF) in which the Debtor actually got a new job (prior to confirmation) which earned more money. The Debtor then INCREASED his 401(k) plan deductions and the Trustee objected saying that the payments were property of the Estate. No, No, says the judge!!!

[optimist]

Just broke- that's good news...I'll forward that to my atty. I'm starting to wonder if he (my attorney) is any good... you wanna represent me?

[laurannm]

This is a pretty link for expenses that you may have missed

http://www.ca-bankruptcy-attorneys.com/calculators/expense_calculator.html

[justbroke]

Just broke- that's good news...I'll forward that to my atty. I'm starting to wonder if he (my attorney) is any good... you wanna represent me?

I'm not a lawyer. However, I believe that your Trustee is just "generally" trying to float that the totality of your circumstances makes it an "abuse" case. Given the data you provided, I don't see how you'll escape having to defend the expenses vs income.

It's not so much the 401(k) issue, it's the everything else that your UST is looking at. (I had researched the 401(k) issue to death because I claimed 401(k) contributions of 6% in my current Plan. My Trustee -- albeit a Chapter 13 Trustee -- didn't have a problem with it. I just can't believe that it's still an issue with some Trustees.

I don't even think the "child care" expenses are insurmountable. You could claim that the expenses allow your spouse to find work.

The Trustee's job is to find money (assets), and you are just at the point where your income level makes them suspicious that a Chapter 13 is better for you... ahem... your creditors!

[stephenm]

Optimist,

You raised a really good question about wondering about your lawyer. My lawyer, who is a trustee also, went through my means test and schedule J before filing to make sure there wasn't anything for the UST to question.

I'm over the median income but only by $25K. I don't know about withdrawing and filing again when your income has fallen quit a bit but I'd suggest talking with a few lawyers and get a few ideas and then retain a lawyer who is also a trustee.

[banca rotta]

I have heard that the US Trustee in some cases has done this to those surrendering their cars. They claim that the debtor can pay a 13 plan without the car payment and the judge has ruled against the UST since it's mostly backwards looking and not post discharge.

Not sure how the court will rule if you are surrendering property.

Good luck

[No Gravy]

[COLOR="Red"]As you know, the United States Trustee contacted me about two weeks ago regarding your case.
He indicated to me that he had a problem with my taking the mortgage deductions when you
were in fact surrendering both properties. I explained that the case law allowed for contractually
due obligations regardless of whether they were actually be paying or not.
As a result, he backed away from his position.

Oh, good grief! Sounds like you got a UST with a bee in his....*ahem* bonnet.

I was told to STAY IN my house, even though I'm surrendering it, because that expense would help (though my income has tanked so much, I'd probably qualify without the mortgage payment).

Besides that, you have to live *somewhere*, so there's going to be that expense.

One thing I've seen suggested here a lot is to put some time and distance between you and the much-bigger-income-than-now, just as with last credit card usage.

If it's possible in your situation, I'd talk to your attorney and see what he says. You don't say so specifically, but it sounds like a lot of the changes that happened were pretty recent.

Good luck to you...I'm sorry the trustee is being such a horse's behind.

[HHM]

Well, you said you have TWO properties, if you are trying to claim BOTH as an expense, you will lose that argument nine ways to Sunday.

[JRScott]

What's your new rental/mortgage, you have to live someplace? Would using the actual numbers help you?

I kinda agree with HHM, no way the UST will let you use both properties though if your lawyer can cite case law he might could win in court but its risky and would be more costly.