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Motion to Extend Time Filed by US Trustee - Please Give Me Your Thoughts

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    Motion to Extend Time Filed by US Trustee - Please Give Me Your Thoughts

    Hello All,

    I'm hoping for your thoughts and opinions on this.

    I filed Chapter 7 on March 4th. I am married, but filed without my husband. We are over the median for a family of 5 in NY, however did pass the means test, and I was able to file a no asset case.

    My 341 meeting was set for April 10th, with a deadline to object of June 10th. At the 341 the Chapter 7 trustee had clearly not reviewed my documents prior to my meeting. He was confused about our family size (I have one child of my own and my husband shares joint custody of his two sons with his ex wife.) The trustee felt that we should not be able to consider ourselves a family of 5, and also deduct my husband's child support from our income in the exemptions. My attorney was not present at my 341 as he is located an hour away from where I live, and since no additional information had been requested prior to the 341 he did not feel it was going to be anything out of the ordinary. He had a local attorney meet me at my 341. As the local attorney was not at all familiar with my case and couldn't represent me, the Ch 7 trustee continued my 341 to May 8th. The trustee told me that I would not have to appear on May 8th, but that he needed to speak with my attorney about my filing.

    I spoke with my attorney after the meeting and informed him of what happened. He advised he would speak to the trustee to help him understand how the filing was prepared and that I should not have to appear on May 8th.

    On April 23rd my attorney received an inquiry from the US Trustee, who requested the following information:

    1. Is there an event or circumstance that caused the Debtor to file her petition? Please explain why the Debtor filed a single petition instead of jointly with her husband. How long have the Debtor and her husband been married?
    2. The Debtor reports net monthly income on Line 10 of Schedule “J” of $7,305.93. However, this figure does not include the income tax refund. For example, the 2018 income tax refund received by the Debtor and her non-filing spouse was $6,324. As a result, there is an additional $527 in monthly income not listed on Schedule “J”. This demonstrates that the Debtor has the ability to pay a portion of her debt of which, according to Schedule E/F, only $53,387.72 is dischargeable.
    3. The balance of the Debtor’s debt is comprised of student loans in the amount of $15,032. Please explain the circumstances under which this debt was incurred.
    4. Additionally, please provide copies of documentation as stated below:
    a. Federal and New York State income tax returns, including W-2 wage statements, 1099 income statements and all attachments for calendar years 2016 and 2017.
    b. The Debtor’s and the non-filing spouse’s most recent payment advices for April 2019.
    c. Bank statements for October 2018 - March 2019.

    I provided all information by April 25th. My attorney advised that the US trustee was suggesting that our income tax refund (which my attorney exempted) should be considered income that could be used to pay into a Chapter 13 plan. My attorney advised he had never seen anything like this before (lucky me) but that he would continue to fight to keep me in a 7 because I do qualify for it. The tax refund has long been spent at this point.

    I heard nothing more up until the date of the 2nd 341 Meeting on May 8th. I confirmed with my attorney that I did not have to attend. He advised that he had spoken with the Ch 7 trustee, who appeared satisfied with the response about our family size.

    On May 8th my 341 meeting was continued again, this time to June 12th. I asked my attorney why, and he advised that the Ch 7 trustee had to keep continuing my 341 until the US Trustee was continued with her hearing.

    Today I received an email from my attorney as follows:
    "The US Trustee would like a detailed explanation of how/what you used your tax refunds for this year.
    Please provide same ASAP."

    When I got home from work I sent my attorney a detailed email with amounts and descriptions of what our tax refund was spent on (auto repairs, attorney/filing fees, medical expenses, clothing for our children, groceries, etc.) I then checked PACER and found this:

    UNITED STATES TRUSTEE’S MOTION TO EXTEND DEADLINES PURSUANT TO FEDERAL RULE OF BANKRUPTCY PROCEDURE 4004 TO FILE COMPLAINT OBJECTING TO DISCHARGE AND TO FILE A MOTION TO DISMISS

    The United States Trustee for Region 2 (the “United States Trustee”), in furtherance of his administrative responsibilities under 28 U.S.C. § 586(3)(G), 11 U.S.C. §§ 704(b)(1) and 707(b)(1) hereby moves this Court for an order, pursuant to Rule 4004 of the Federal Rules of Bankruptcy Procedure, extending the deadlines for filing a complaint objecting to discharge and delaying the entry of discharge under 11 U.S.C. § 727, and for filing a Motion to Dismiss pursuant to 11 U.S.C. § 707(a) & (b) (“Motion”). In support of the Motion, the United States Trustee represents and alleges as follows:

    1. On March 4, 2019, the Debtor commenced a chapter 7 case by filing a voluntary petition for relief with the United States Bankruptcy Court for the Northern District of New York.
    2. XXX XXXX (“Attorney”) is the attorney of record for the Debtor.
    3. XXXX, Esq., is the duly appointed chapter 7 trustee.
    4. On April 23, 2019, the United States Trustee requested a written explanation and documentation relating to the Debtor’s income and expenses. (“Inquiry Letter”).
    5. Attorney XXX responded to the Inquiry Letter on April 29, 2019, but the response raised additional questions concerning the Debtor’s income and expenditures. Case 19-XXX Doc 13 Filed 05/14/19 Entered 05/14/19 10:20:17 Desc Main Document Page 1 of 2 2
    6. Pursuant to Fed. R. Bankr. P. 1017(e), the deadline for filing a motion, pursuant to § 707 (a) & (b) and § 727, is June 10, 2019.
    7. The United States Trustee requires additional documentation and information from the Debtor to complete his inquiry and due diligence to determine whether to pursue further action.

    WHEREFORE, the United States Trustee requests that the statutory deadlines for filing a complaint against the Debtor pursuant to 11 U.S.C. § 727, and for filing a motion to dismiss under 11 U.S.C. § 707, be extended pursuant to Federal Rules of Bankruptcy Procedure 4004, until September 13, 2019, and that the Court grant such other relief as may be appropriate. Dated: May 14, 2019


    What now? Can anyone tell me what might happen from here? Should I brace myself for the seemingly inevitable conversion to a Chapter 13?

    Any thoughts/opinions would be greatly appreciated. This has been going on for months, and it appears there is no end in sight. I feel so defeated.

    Thank you for your time!

    #2
    I don't have any advice just want to be supportive. I don't know what the law is, I am hoping they just want to see what the income tax refund was spent on and it looks to me that you spent it on necessary (not luxury items) so I hope that helps your case.

    Comment


      #3
      Thank you carmella13, I really appreciate your kind words!

      Comment


        #4
        You're welcome.

        Comment


          #5
          Originally posted by Raven78 View Post
          WHEREFORE, the United States Trustee requests that the statutory deadlines for filing a complaint against the Debtor pursuant to 11 U.S.C. § 727, and for filing a motion to dismiss under 11 U.S.C. § 707, be extended pursuant to Federal Rules of Bankruptcy Procedure 4004, until September 13, 2019, and that the Court grant such other relief as may be appropriate. Dated: May 14, 2019
          Originally posted by Raven78 View Post
          What now? Can anyone tell me what might happen from here? Should I brace myself for the seemingly inevitable conversion to a Chapter 13?
          Given that the UST has asked for an extension and the reasons appear to me, on the surface, to be reasonable, the Trustee will get the time extended without question. Your attorney is likely to echo that comment that the UST may request time to extend under the FRBP (Federal Rules of Bankruptcy Procedure). If this is the first extension request, it would be hard to defeat.

          Originally posted by Raven78 View Post
          Any thoughts/opinions would be greatly appreciated. This has been going on for months, and it appears there is no end in sight. I feel so defeated.
          I wouldn't feel defeated. You only filed on March 4th. Most people that filed on March 4th, are not even yet discharged (they may be discharged sometime in June). The UST apparently has a reason to look into your finances. It is their job to police and maintain the integrity of bankruptcy, and to make sure that not everyone that can afford to pay their creditors some dividend, do not get to discharge all their debt through a Chapter 7.

          In the worst case, you can convert to Chapter 13.

          But, let's not cross that bridge yet. Let your attorney advise you on the process and let the UST determine if there is anything more that they need from you; in other words, make sure you provide them with anything else that they request. Not one part of this means the "inevitable" conversion to Chapter 13. If the UST already had a case for that, this would have been a Motion for Dismissal and not a motion to extend the time for them to look at whether the case should be dismissed. Your case must be borderline and the UST is trying to determine whether it should be dismissed or converted (no one can force you to convert).

          (The nitty-gritty... I think the issue is specifically the tax refund and whether you could in fact "exempt" it under some theory -- such as tenancy by the entireties. The issue is likely that you are both working (?) and that you each have income, and may each have a "proportionate" amount of that refund attributable to you each individually. When you detailed how it was spent, the UST is likely looking to see if you used it for expenses that you claimed, already, in your Schedules. For example, you claimed clothing for your children, auto repairs, etc, but you likely already claimed an expense for those, on Schedule J and the Means Test, for those things. The UST is very careful about high-income married debtors filing without their spouse and claiming all the other income is "offset" using the marital adjustment. It's just a little area of contention and an area where the UST can pick at. Your attorney appears to be ready to fight any of that "nit-picking" that is likely to happen. Unless and until the UST makes a move to dismiss, it is nothing but a waiting game. But, let your attorney do the worrying for you. Right now, the UST is checking every single number on your expenses to make sure they didn't miss anything.)

          For now, I would be cautiously concerned, but not overly concerned with the UST's inquiry. In an over-the-median income case, this should be expected rather than un-expected.
          Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
          Status: (Auto) Discharged and Closed! 5/10
          Visit My BKForum Blog: justbroke's Blog


          I am not an attorney. Any advice provided is not legal advice.

          Comment

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