Ch.7 dismissed due to "abuse" AND "totality of circumstances"

[banca rotta]

but wouldn't the OP get 1099ed and get a huge tax bill if she did this outside of a chap 13? Also, doesn't this assume the OP can get another loan (with little or no cash down) while defaulting on the leases before entering a 13? (or does the UST take the position that they should have planned their bk better and should have dumped the cars before filing the 7) Seems like a catch 22

Plus, isn't taking a new loan out while you know you are insolvent considered fraud?

No I never mentioned any new loans. Yes the OP would get a tax bill. It's also much better then 5 years of debtors prison I keep reading about on the 13 forum.

My opinion is kinda out of the Dave Ramsey playbook except Dave tells everyone to pay down their debt.

If I had that kind of income as long as it wouldn't cost me any business I would live very frugal, save up the cash for used cars, feed the family, keep the lights on and the roof over my head then within a year from now as all the charge offs occur hire a good attorney or even do it myself to negotiate with the creditors and then save up for the taxes which will be do the next tax year and pay them.

Unfortunatly the OP will have to really work at this and it will take time but 2 years is better then 5 and 5 is still better then a lifetime of debt.

It's going tp be difficult for that high of an income to have a nice easy "wipe the slate clean" ch7.

[bkmaggster]

Plus, isn't taking a new loan out while you know you are insolvent considered fraud?

Not a secured loan.

[2manybills]

Before we filed and before our fico went from 720 to 545 (only a number), we bought a new car, cheaper on gas and about $50.00 less a month than our leased vehicle that only had 2 years left on it. We knew that we wouldn't get the rate we got now in a couple of years (or maybe we would) but it is also accepted more by UST to purchase rather than lease.

[backtoschool]

The trustee definitely wants to convert the OP's case to a 13. The income is just too much above the median, and any expenses but food, utilities, and shelter are going to come into question to fund a chap 13 plan.

Settling debts often gives you a huge tax bill, because the forgiven amount becomes "income" on a 1099 form. I know this because I was going to settle my debts as an alternative to chap 13 when I was making a high income.

[goingcrzy]

As was mentioned earlier if the two, 40k cars were actually secured loans rather then leases you would have more of an argument against the UST since congress allowed this.

I'm not implying the OP is a fraud or an abuser especially when some cities are very expensive and some careers actually require expensive cars, but if this was me I would have basically dumped the cars and bought two cheaper 12k cars, stopped all payments on all debts except for the house and with such a high income save up the money to negotiate with your creditors like 10to 20 cents on the dollar.

The UST probably feels the same way and wants you in a chapter 13 to do just that.


Good luck

but wouldn't the OP get 1099ed and get a huge tax bill if she did this outside of a chap 13? Also, doesn't this assume the OP can get another loan (with little or no cash down) while defaulting on the leases before entering a 13? (or does the UST take the position that they should have planned their bk better and should have dumped the cars before filing the 7) Seems like a catch 22

Plus, isn't taking a new loan out while you know you are insolvent considered fraud?

[justbroke]

In some areas, it is average to have a $3K or $4K house payment, where in others $600 is the norm. As with salaries, if you are making $100K a year but your in a house that costs $3 or $4K a month, you will wind up just as much in the hole as the family that is making $50K in that $600 a month house. I hope my example makes sense, but its all relative.

Makes perfect sense! I agree with it as well.

[banca rotta]

What does your lawyer think?

40k in vehicles and music lessons for your children sound discretionary. Can you convert to a 13 instead, or is it too late?

The OP can convert. That's what the UST wants. Either a 13 or dismissal. A 7 maybe difficult with these expenses and income. The judge may decide which it is if it goes to court.

[banca rotta]

As was mentioned earlier if the two, 40k cars were actually secured loans rather then leases you would have more of an argument against the UST since congress allowed this.

I'm not implying the OP is a fraud or an abuser especially when some cities are very expensive and some careers actually require expensive cars, but if this was me I would have basically dumped the cars and bought two cheaper 12k cars, stopped all payments on all debts except for the house and with such a high income save up the money to negotiate with your creditors like 10to 20 cents on the dollar.

The UST probably feels the same way and wants you in a chapter 13 to do just that.


Good luck

[OhioFiler]

One man's advice is another man's lecture. It's all perception. If you can take the emotions out of it and mentally filter the information, you may find some great wisdom here. In combined experience, people here have about seen it all.

In the end, as you know, the only opinion that matters is the trustee's.

And for the record, I know everyone on this forum secretly envies my sweet bicycle and my bus pass...LOL

It's no longer a secret! I always wanted a Schwinn!

[OhioFiler]

Bkmaggster, I agree it's all about perception. I would add that we all have different communication styles, and while one person puts it politely, another one may be very blatant and downright rude. So I take no offense whatsoever because only I and my close circle know my life circumstances, and no one else does.

You can't "agree" with someone's post then "add" the complete opposite of what you agree with is also true. That would mean you actually disagree with Bkmaggster.

Your sharing of your bk related life circumstances includes those of us who read your posts in your circle.

[justbroke]

Oh, I meant the opposite of the McMansion case, where the owners where dismissed because of high secured debt. I can't find any cases after the McMansion case where the debtors were dismissed because of a high payment.

There won't be any. All the other cases set precedence for that particular Circuit or maybe beyond that. There are plenty of cases, on a daily basis, that are dismissed under totality of circumstances and/or abuse under 11 USC 707(b)(3)(B) or 707(b)(3)(A), respectively.

The totality of circumstances always goes to an objective look at the debtor's particular circumstance and whether a discharge under Chapter 7 would be abusive. Trust me, the McMansion case didn't open up the doors and make those parts of the Code disappear. They are even mentioned in the decision.

The UST looked at our case closely and even questioned the fact that I don't work and that we are putting a money in dh's 401K. It was crazy all the little things he looked at.

This is how they nit pick, and before you know it... you have $200 in positive disposable income and poof.. you're in a Chapter 13!

[StartingOver08]

Look up the posts by jessiegirl. She had a 2004 debtors exam in her BK.

[goingcrzy]

So who here has had to go to court? Any insights. Do we just sit there and let the lawyers battle it out or are we questioned for 90 minutes in front of a judge. I am starting to get scared the more I think about.

[aces67]

We came under scrutiny of the UST. We got through it and ours wasn't for car notes but I'm thinking that what the UST is thinking is this:

It is not NECESSARY to have 2 cars @ $40 K each and if you didn't have those then you would have extra money to put towards your other debts.

The UST looked at our case closely and even questioned the fact that I don't work and that we are putting a money in dh's 401K. It was crazy all the little things he looked at.

Good luck to you! Your lawyer should file your objection to the UST's motion. If the objection is a good one then it may get dismissed before you have to go to court.

[goingcrzy]

The opposite of what?[/QUOTE]

Oh, I meant the opposite of the McMansion case, where the owners where dismissed because of high secured debt. I can't find any cases after the McMansion case where the debtors were dismissed because of a high payment.