not good news...

[AnnieG]

With only two days before discharge, the US Trustee has posted a motion to dismiss based on "substancial abuse" (we were looking to dispose a lot of unsecured debt, due to job losses, etc.). We filed for CH7 showing $120/month in disposable income. The US Trustee didn't even show up for our 341 and only sent one question (did my husband find work yet). The motion cited that we have large car payments - which is true- but we are upside down on both loans that we would owe thousands before we could pay them off. If we were to do a cram down, then this would produce a few hundred more a month that could become disposable income.
My question is, since we've been through the CH7 process and may be converting to CH13, will we be "grandfathered" by the "old" BK laws?
I would be peaceful with the CH13, if that is the way it goes. I just want to move forward. We knew it would be a risk due to the car situation, so this is not a surprise. What is really going to be the challenge is that I will be moving for my job over the next 6-9 months, and the options for selling my house and what to do for a new house are what are really plaguing me. But, I MUST move to keep my job. I'm hoping the trustee will work with me on this?
Thanks for any input....

[bezoar]

Yes - if you filed before the deadline, you are subject to the pre-10/17 rules, even if you have to convert.

Don't simply roll over, though - go to the hearing and fight. The judge has final say. 'Splain your circumstances, upcoming move, etc. It's always worth a try.

[2US]

What state did you file in? 2 days before discharge? Is that normal?

[AnnieG]

What state did you file in? 2 days before discharge? Is that normal?

We filed in Nebraska.
I will be talking to our lawyer tomorrow to discuss the details. One on the other items the US Trustee mentioned was that we got back a large tax refund. But the reason we did get a large refund was that I was trying to start a consulting business on the side (got a salary cut of 20%) and had some business expenses for the startup that I had taken as a loss. Wouldn't it be a done deal about the car situation? If they could do a cram down and show even $100 more in disposable income, then I could be forced into CH13?
I am very confident that our CH7 budget figures are within guidelines. There is NO extra meat on those bones!
Talk about your 11th-hour surprises!

[StaciMM]

Perhaps the UST is thinking that you have too much car for your income/financial situation? How high are your car payments, and could you get a reliable used car for less? (The IRS guidelines allow about $875 or so for 2 vehicle payments. If you're drastically over this, even though the new guidelines don't apply to you, that may be why they're pushing it... )

[AnnieG]

Perhaps the UST is thinking that you have too much car for your income/financial situation? How high are your car payments, and could you get a reliable used car for less? (The IRS guidelines allow about $875 or so for 2 vehicle payments. If you're drastically over this, even though the new guidelines don't apply to you, that may be why they're pushing it... )

Our two car payments total $969. So, not drastically over the guideline.... and I would be happy to get a cheaper car, but it would be about $6,000 difference of what we could get for the car and what we owe on the car!

[AAAArt]

"substantial abuse" to me sounds like he/she thinks that you spent too much (or charged too much too close to the filing date. Check your cc's and when you got the cars. Be ready to explain the situation and maybe it will go away.

[hhou812hh]

]"substantial abuse" to me sounds like he/she thinks that you spent too much (or charged too much too close to the filing date. Check your cc's and when you got the cars. Be ready to explain the situation and maybe it will go away[/B].

No. Charging too much just before filing would actually be fraud in bk terms. Not illegal, just means you would have to pay it back in full.

"Substantial abuse" really isn't the appropriate term that congress and the courts gave this situation. Under section 707(b) of the bk code (pre Oct 17 05) if the US Trustee feels that a debtors expenses are too high and they have some money to fund a ch13 they will file a motion under 707(b) to have the ch7 case dismissed or converted to a ch13.

The new means test is 707(b) ammended and this test does the same job the US trustee did. This new term is called "the presumtion of abuse".

AnnieG can explain to the judge why she needs the ch7 and can't afford to fund a feasable ch13 then it would be up to the judge to decide.

I think the best thing for AnnieG would be to go over your expenses and compair it with the IRS based in your region and see if it's in line otherwise you maybe in a ch13.

It comes as no surprise why the post Oct 17 law now demands that an atty certify it's clients. Most lawyers know about this but fail to inform clients. I had 2 lawyers tell me I can file a ch7 under the old law and if I did, this certainly would have happened to me. No matter how much I padded my expenses I still had some disposable income leftover.

Good luck!!!

[edwards2]

Boy do I know how you feel Annie G....we too received the infamous letter from the U. S. Trustee; only ours was ONE day before our discharge. Scary doesnt even begin to describe it because a Chapter 13 in our case would have been a disaster! I agree with hhou812hh that the term substantial abuse does mean the trustee thinks there is enough disposable income to pay creditors. IN our case the trustee was questioning an expense which was over the acceptable limits. We had to defend our case in a 2004 Exam with the U.S. Trustee. By the way the U.S. Trustee does not usually attend 341 meetings. Anyway, we met with her and our lawyer in a file room(no kidding) with a tape recorder taping the meeting instead of a court reporter. The whole meeting took 30 minutes. I was candid with her; I told her the whole sordid mess as to why we had to file BK. It was embarrassing but it was the only way I believe we convinced her to approve our discharge. She was very nice and non-confrontational. I also agree with bezoar that you should not just cave - you have nothing to lose and everything to gain by defending your case. Our attorney did not say a word in our meeting; I did all the talking and frankly I think that is what determined the outcome. You can do it too. Above all be completely honest no matter what....good luck....

[dumbpig]

Annie,
I am quite confused. HOw did the US Trustee end up with your case info after the trustee pushed it through? Was it a random check and they objected to your expenses? I wonder what made them investigate you after you almost made it through.

[StaciMM]

I believe the US Trustee reviews most/all petitions where the income is over the median.

[dumbpig]

I had my 341 on oct 6th and now im getting nervous. I make 50k as a single individual and they asked for no documentation before the meeting and the trustee stated he found no assets. He asked no questions about seperation with wife or where my money went. Do they leave all those questions up to the us trustee and do they prusue most cases or do you truly have to get unlucky to get audited.

[edwards2]

dumbpig - we asked the very same thing of our lawyer. He apparently was taken aback by the trustee's objections. However, he also thought sending her a "if you really have issues let us know" letter would suffice too... obviously it didnt. I was shocked to get the letter. I thought we had made it. Who wouldn't have in our cases? We did find out from our attorney what issues the U.S. Trustee had and I am sure Annie will too. But is sure is frightening to realize you thought you were home free after the 341 only to find out differently. I do believe we are the exception - not the rule so don't stress simply because of us. By the way we are in Tennessee.

[Starchild 1066]

Stuff like this is why my stomach is always in a knot. This is a lot like torture.Hope to God I don't wind up with an ulcer or a nervous breakdown.

[2US]

When you say that you didn't hear about this until 1 day before expected discharge, does this mean this is when you got the letter, or you noticed it in PACER 1 day before discharge? Also, when you say when you are suppose to get discharged, do you mean your last day for objections?