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Inflated Income, $100k unsecured, $36k assets

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  • FreekingOut
    replied
    flashoflight Thank you! I’m going to apply for jobs every day until the 341 and keep a log as proof that I’ve been trying to find full-time work.

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  • flashoflight
    replied
    I think your lawyer is correct and not trying to do anything bad to you. When he does your schedule I, he needs to include the six months of seasonal work, six months of unemployment, and then divide all of that by 12. At least when he does it this way, you can claim that you can't find a job that pays more than unemployment during the other six months. Otherwise, you will be grilled on why you can't work the other six months. They grilled my wife on why she can't work at all and help pay the creditors.

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  • FreekingOut
    replied
    justbroke oh lol, ok…. I’ve been back to freaking out. If they dismissed the case and I didn’t convert, what would happen then? I’d be garnished forever? Also, hypothetically, would it be “bad faith” if I continued working when the seasonal work ended, but was UNDER employed? Making far less than usual? Like equivalent to less than my budget? I’d use my cash to supplemental bills, but that’s proof that I’m trying to bring in income.

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  • justbroke
    replied
    Nope, I said don't convert... if you don't want to be in a Chapter 13.

    I was trying to imply that a Chapter 13 is voluntary and you don't have to be in a Chapter 13. If you are trying to get rid of debt and you only work seasonally, a Chapter 13 is going to be a bear and difficult, in my opinion.

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  • FreekingOut
    replied
    justbroke for the last sentence of your reply, did you mean “just convert” to Chapter 13 if the UST tries to dismiss the Chapter 7 case? Or maybe I don’t understand.

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  • justbroke
    replied
    Originally posted by FreekingOut View Post
    justbroke Would you think that 6-months before re-employment would be considered soon? Would it make a difference if I filed in October (only recently unemployed) vs. next February (four months unemployed?). Also, I’ve seen people say on the forum that a request for a 12-month lookback could be made. Would that be enough, since my average annual income would be well below the Maryland Means Test income limit? ($35,000 vs. $58,000). My tax returns would also show a trending income of $35,000 for the past three years.
    I can't say as that is speculation. I think the issue may be that the lookback, when done towards the end of your periodic employment, would show income approaching or surpassing $70,000. Think about it... if you work 6 months a year and make $35k, the means test would show $70K. This is because the means test take the 6 months, divides by 6, then multiplies by 12 to reach annual income. Of course the tax returns show that it's only $35K and that's during a seasonal employment.

    Your case is certainly different and you will need to lean o your attorney. My personal thought is that I would hope that the UST doesn't care and that your attorney can argue that your income is periodic. However, as your attorney stated, does this bring up a bad faith question because you don't seek work during the off-season.

    I'm not an expert. You could file and, worse case, don't convert to a Chapter 13 if the UST moves to dismiss your case.

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  • FreekingOut
    replied
    justbroke Would you think that 6-months before re-employment would be considered soon? Would it make a difference if I filed in October (only recently unemployed) vs. next February (four months unemployed?). Also, I’ve seen people say on the forum that a request for a 12-month lookback could be made. Would that be enough, since my average annual income would be well below the Maryland Means Test income limit? ($35,000 vs. $58,000). My tax returns would also show a trending income of $35,000 for the past three years.

    Leave a comment:


  • justbroke
    replied
    Originally posted by FreekingOut View Post
    ... here’s my question: is my lawyer correct that unemployment will quickly qualify me for Chapter 7?
    Well, technically it could depend on the six-month lookback (since the Means Test is based on that). But it deepness on the tenacity of the United States Trustee (UST) and whether they want to look further in your case. I mean, someone without income and has debt is highly likely to be eligible for a discharge under Chapter 7 since they do not have the means (a/k/a "passes the means test") to afford to fund a Chapter 13. In the simplistic viewpoint, it would be hard for the UST to consider someone on unemployment to have the ability to pay a dividend to their creditors in a Chapter 13. (This doesn't consider the question as to whether the unemployed debtor has non-exempt, or partially exempt, assets which could be liquidated in a Chapter 7.)

    Originally posted by FreekingOut View Post
    My lawyer said that it was all good when I first contacted him in March (unemployed), but now, it’s a problem. He said that filing now, with an explanation that my job is seasonal, will result in the trustee saying that I can get another job before it ends; but that if I’m unemployed, they can’t force me to get a job at that moment.
    And there's the rub. If the UST suspects that you could find gainful employment or will be re-employed soon, they could look to your average and, I suppose, argue that you could fund a Chapter 13. (Although seasonal employment would not allow you to meet the necessity to have "regular" income in a Chapter 13.)

    Originally posted by FreekingOut View Post
    Second question: I’m considering raising my internet bill by $100 and my car insurance by $100, to raise my monthly budget on-top of the unemployment in October. Could that raise a red flag? We’re not filing for another two months; and I don’t care about the money, because all cash beyond the $10,800 is getting taken anyway.
    In most Districts, there is a customary allowance for certain expenses. Anything over $100 for internet or cellular service, is usually frowned upon. Trustee's are known to force this to be reduced to $100 (been there, done that... even though I needed the higher speed to work from home and generate income!).

    If you're on unemployment most people are expected to do belt-tightening... not go on a spending splurge. Whether or not that would pique the UST's curiosity into your specific case, is too fact-specific. (By fact-specific, the UST "could" see that you had a well-paying job in the past but suddenly didn't have a job, and your expense increased for no reasonable reason. Would that "pique" their curiosity? I don't know.)

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  • FreekingOut
    replied
    My lawyer said that it was all good when I first contacted him in March (unemployed), but now, it’s a problem. He said that filing now, with an explanation that my job is seasonal, will result in the trustee saying that I can get another job before it ends; but that if I’m unemployed, they can’t force me to get a job at that moment.
    Last edited by FreekingOut; 08-12-2021, 03:49 PM.

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  • FreekingOut
    replied
    justbroke I hope you’ve been well. I was supposed to file Chapter 7 yesterday, but my attorney said that I’m having too much disposable income and that the trustee will argue that I can do Chapter 13 (which I don’t want to do). I’ve changed my exemptions to just $10,800 in cash and $600 in household goods, leaving roughly $17,000 in assets exposed (car and household stuff). My lawyer said that the trustee will go after my paid off car (valued at $9,500) and $2,000 in unprotected cash (which I’m fine with; I’d rather give up the car and get a cheaper one on payments)

    As to the income, I work a seasonal job that ends October 3rd. It pays well during 6 months of the year and then nothing til next April. He said that when it ends, leaving me unemployed, the trustee can’t force me to get a job; so my lack of income will easily qualify me then, no problem. I’m not worried about the job/income, I’ve been there for 15 years and even the unemployment covers my bills for the 6 months off. Besides, I’ll have the $10k to supplement.

    I’ve been searching through the forum, but here’s my question: is my lawyer correct that unemployment will quickly qualify me for Chapter 7? I’m paranoid that he’s trying to set me up for a Chapter 13, which from my research, means that he’d get more money from the monthly payments. He said that it looks like I can afford to pay $650-$900/month, based on my current (seasonal) income. I did the 6-month lookback calculation on my paychecks and it averages $1800/month after taxes, with two of those months receiving no pay at all. He said it looks like I’m receiving $2800/month.

    Second question: I’m considering raising my internet bill by $100 and my car insurance by $100, to raise my monthly budget on-top of the unemployment in October. Could that raise a red flag? We’re not filing for another two months; and I don’t care about the money, because all cash beyond the $10,800 is getting taken anyway.

    Leave a comment:


  • justbroke
    replied
    The IRS is still "processing" millions of 2019 tax returns. They have yet to process my personal taxes or my business taxes from 2019. Another friend of mine complained because her taxes were held up for a missing form although she filed electronically in February 2020 (for 2019). They still haven't processed her taxes either and she had filed electronically.

    They took 2 months to respond to AMEX that they didn't like something on my IRS 4506-T and it was perfectly done. Did it again and another 2 months went by. AMEX cancelled my application because it took more than 90 days. Had to apply again.

    The IRS is a hot mess.

    Leave a comment:


  • holamola
    replied
    Originally posted by FreekingOut View Post
    justbroke ok. I’ll be talking with my bk attorney on Tuesday. I’m also wondering if I’ll have to wait for the IRS to bill me before including the tax debt in the Chapter 7. I’m fine with it being non-dischargeable, but if the IRS takes 16 weeks or more to process the amended returns and to send the bill, I’m not sure how long I can last financially. I’d like to make the minimum payments until we file, to avoid adding late charges to the Chapter 7; and I’m wondering how long I could go without making payments before the creditors filed suit for garnishment. It seems at this point that any minimum payments will be preferential, since they’re getting to be over $600, but I figure that if the cash will be gone anyway, wouldn’t it make sense to avoid late marks on the credit report too? Or does it make sense to prioritize the cash at hand for necessities, and to stop making payments until we file; since the timeline for filing is in question.

    I’ll definitely be asking my attorney, but if paying the IRS wont be preferential and I don‘t have to wait for the bill to be assessed; I’m guessing that I could get the taxes done, send the IRS a check and file Chapter 7 by the end of the month. How long do the creditors typically take before filing suit? Would it make sense to ask for COVID relief, to push the payments for three months?

    The IRS took a year and half to amend one of my tax return and they came back last month saying that whatever I provided them did not really help (even though I had a bookkeeper and a CPA work on it and supplied them with all documents, invoices ...), the IRS have millions of returns that they did not finish yet, let alone the amended returns, they are finding any reason to not refund any money they owe. Do not believe the 16 weeks, for me it took around 15 months, over 7 months in the waiting for their first letter in which I thought they never got my amended return, then they took another 7-8 months in the back and forth, at the end, they should have paid me $50,000+, they claimed that I may owe them more or I should sign a waiver that they owe me nothing. I picked the waiver because I got sick of it, never ever pay the IRS in advance for anything as you will never get it back.

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  • justbroke
    replied
    Trustee would pay themself a commission (usually 7-10%), and then pay the priority unsecured debt (IRS and State non-dischargerable tax debt), and then the general unsecured debt (pro-rata). This is something to ask your attorney to see if they have a better idea so that you maximize what gets sent to the IRS.

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  • FreekingOut
    replied
    justbroke understood. Suppose I simply get the taxes done, assess the total tax debt and file Chapter 7 without any IRS payment. Am I understanding that the cash would go to the IRS first, even though the tax debt is non-dischargeable (with the amended tax debt being assessed sooner than 240 days and not being at least three years old)? Or can I expect that the trustee will pay the creditors and I’ll have to get a payment plan after the IRS sends the bill.

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  • justbroke
    replied
    If your tax returns already indicate that you owe money, that is sufficient proof that you have a tax liability. Except for certain non-dischargeable debt, there's an interesting fact about preferences. A clawback doesn't really affect you personally. Preferences are clawed back from the creditor(s) to whom you made payment(s). That clawback is then used to pay all the unsecured creditors pro-rata (an equal share based on the percentage of total unsecured debt that each unsecured creditor has claimed).

    It's best not to make preferential payments only because it delays the administration, but not the discharge, of a case. I don't believe that paying a non-dischargeable (past due) tax debt should be treated as a preference but that's something that you can ask your bankruptcy attorney.

    (Take note that it could be a preference to pay the IRS more than they would have received in your hypothetical Chapter 7. My guess is that this is to prevent debtors from overpaying the IRS by paying for future tax liability. A debtor might do this in order to keep the money out of the bankruptcy estate. For example, you said that you'd have $15K left after paying the IRS. If you had "prepaid" taxes for 2021 , by paying the IRS an extra $15K over what you owed before filing, that could be seen as a preference and subject to clawback.)

    At least those are my general thoughts on this.

    Leave a comment:

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