Chapter 7 business debtor - Schedule I & J questions

[jonance]

Hi everyone,

I've been reading through all of the posts (even the archives) of this site and let me say it is by far the best BK forum on the internet

In about 6 months I am going to file individual Chapter 7 non-consumer (wife not filing) as I am going to be giving back 5 investment properties that I will stop paying this month, plus a 40k line of business credit. The whole point is to get out of the whole thing without the possiblity of deficiency judgments coming back to me in 14 years (the statute of limitations in KY) and to rid myself of the 40k personal guarantee as well.

I have assets, but most are exempt or very close so i'll buy back any equity needed to do so. My main issue right now is narrowing the gap between schedule I & J so i don't have any disposable income, thus cannot be forced into a chapter 13. I have an attorney who advised me to get a car and loan, which i am doing now. I am also getting life insurance, etc. things to just lower that DMI number. Does anyone else have any creative suggestions that i can do for the next 6 months? I don't think i'll have too much farther to go to get there, maybe a few hundred bucks? Can my wife get a loan on her paid off car? Anything else?

One other questions, my attorney that said to get life insurance also said she doesn't want to put more than $75 each on Schedule J. However it seems it will cost $130-$140 each. I thought schedule J was "actual" expenses. If that's what they are....isn't that what you put? She is a very good attorney and quick to respond, but not sure if she's being too cautious with the figures or not....

[justbroke]

I have an attorney who advised me to get a car and loan, which i am doing now. I am also getting life insurance, etc. things to just lower that DMI number. Does anyone else have any creative suggestions that i can do for the next 6 months? I don't think i'll have too much farther to go to get there, maybe a few hundred bucks? Can my wife get a loan on her paid off car? Anything else?

Your attorney has suggested things that are appropriate and will usually not be challenged. I can't provide any advice on how to lower your DMI other than what your attorney has already instructed you on.

One other questions, my attorney that said to get life insurance also said she doesn't want to put more than $75 each on Schedule J. However it seems it will cost $130-$140 each. I thought schedule J was "actual" expenses. If that's what they are....isn't that what you put? She is a very good attorney and quick to respond, but not sure if she's being too cautious with the figures or not....

Schedule J is actual, but your attorney is trying not to get into a fight with the Trustee. If you're "that" close to having a positive "disposable income", then I'd say you are probably in for a fight with the Trustee anyhow.

If you are a few hundred bucks from a negative disposable income, even after incurring more debt, you have issues!

I'm assuming you're over-the-median and have over $100K in unsecured debt. This may turn into a battle anyhow, and your attorney is being cautious. The United States Trustee (UST) himself will get involved, and this is different from trying to appease a panel trustee. The UST has the statutory power and duty to challenge your case. Don't be frightened though. Just follow your attorney's suggestions (advice) and hopefully, while on the radar, you're not a giant blip on that radar screen.

[jonance]

Thanks for the info!

My attorney did also say she has spoken with the big dog UST in our district and he said they are really not scrutinizing schedule J and DMI that much in non-consumer cases. Really my only unsececured debt right now is the 40k line of credit, but after foreclosures that would be higher based on deficiencies, which is what i'm trying to protect myself from so i can move forward with no worries.

From what i understand non-consumers can have a little disposable income showing. I think she wants to get me to around or under $200. I think she is going to get me there. She suggested tithing, of course i don't go to church, but can i contribute to other charities? I've heard that cannot be questioned...and i can give a fairly large amount. Didn't you comment on that in a post elsewhere?

She also said my wife can get a loan on her vehicle which is paid off. Since she isn't filing, can't she do what she wants without much question? I'm not incurring any more debt...she is getting the loan for the new car, etc. Not sure how her non-filing status plays into any questions they may have. I couldn't get the loan due to debt to income ratio with these stupid properties.

[justbroke]

From what i understand non-consumers can have a little disposable income showing. I think she wants to get me to around or under $200. I think she is going to get me there. She suggested tithing, of course i don't go to church, but can i contribute to other charities? I've heard that cannot be questioned...and i can give a fairly large amount. Didn't you comment on that in a post elsewhere?

You can have up to $182.50 if that amount of disposable income doesn't represent, when multiplied by 60, 25% of more of your unsecured debt.

[jonance]

That's on schedule J even for a non-consumer?

I'm wondering how the unsecured part of the property will be handled when filing since there will definitely not be a sale yet. Do you think we would guesstimate what a deficiency would be after attoneys fees, etc? That part is of some confusion to me. The point of filing is to prevent the possiblity of a deficiency judgement on all these properties....and some are underwater, some not too much, but after the properties are abandoned and a sale is made, who knows what they will bring.

If it was just the $40k unsecured i'd pay that off 100% right away and be done with it.

[justbroke]

That's on schedule J even for a non-consumer?

Non-consumer just means that you don't take the means test. You still need to be qualified to receive one!

I'm wondering how the unsecured part of the property will be handled when filing since there will definitely not be a sale yet. Do you think we would guesstimate what a deficiency would be after attoneys fees, etc? That part is of some confusion to me. The point of filing is to prevent the possiblity of a deficiency judgement on all these properties....and some are underwater, some not too much, but after the properties are abandoned and a sale is made, who knows what they will bring.

Why are you worried about deficiencies?

[jonance]

Well we live in a deficiency state with judicial foreclosure (KY). My wife and I have about 60k equity in our house, she has a paid off car, and I make a good living. Even though I hear that they aren't coming after deficiencies now, i also hear it depends on your situation. Mine are investment properties and i have income they can garnish, so the odds of them eventually coming after me are pretty good I think.

Like i said, KY has a statute of limitations of 14 years, so they could put the deficiencies on the backburner, or sell to a collections agency who could then levy my bank account and garnish wages, etc. The main reason i am planning to file is peace of mind and a fresh start. I can't wake up every morning hoping one of these 5 dont' come after me for $50k or $60k in the next 14 years. I haven't been told i'm crazy yet for thinking that.....do you have reason to believe i shouldn't think they will ever want to recoup that $$?

[justbroke]

Like i said, KY has a statute of limitations of 14 years, so they could put the deficiencies on the backburner, or sell to a collections agency who could then levy my bank account and garnish wages, etc. The main reason i am planning to file is peace of mind and a fresh start. I can't wake up every morning hoping one of these 5 dont' come after me for $50k or $60k in the next 14 years. I haven't been told i'm crazy yet for thinking that.....do you have reason to believe i shouldn't think they will ever want to recoup that $$?

I think that the bankruptcy would be a good tool to relieve you of any threat of deficiency collection.

[jonance]

I'm glad you feel that way (hopefully you are not just humoring me I would just hate to get on down the line and have to deal with all this when i have kids, etc. I am really hoping i can get by with the Chapter 7. SouthernBelle did it with some disposable income so i'm hoping the fact it is non-consumer and mainly investment property mortgages will help. I'm wondering if any of the mortgage companies will even file claims for the unsecured portion since i'm filing a 7. The line of credit has one more person on it, they are broke, but not bankrupt....so i'm wondering if they file a claim as well.

I'm really just trying to get the whole thing behind me. Just want to keep my stuff and start over. I'm willing to pay whatever it costs (the equity buy backs via help from family) so it isn't like i'm trying to get off scott free and not claim assets. If i could cut a check and be done with it tomorrow i would. Wondering if they look more favorably at my chapter 7 case since i will be an asset case from the start.

I think i just need to get my expenses up a bit more...

[biotechsolution]

You can have up to $182.50 if that amount of disposable income doesn't represent, when multiplied by 60, 25% of more of your unsecured debt.

justbroke...I'm confused.

The UST cannot force a non-consumer debtor into a Chapter 13 for excess disposable income. Those only come under 707(b) which doesn't apply to non-consumer debtors. They can also not move to dismiss under 707(b) which does severely limit dismissals. They can object under 707(a) but I have read most courts like to limit those dissmals to 'bad faith' situations.

I wonder if your attorney has done a lot of business bankruptcies.

I had a 18K private school tuition bill and never heard a peep from the UST.

[justbroke]

justbroke...I'm confused.

Let's clear some things up, because I may have said something that does not apply if this is a non-consumer case.

The UST cannot force a non-consumer debtor into a Chapter 13 for excess disposable income.

A UST cannot make anyone go into a Chapter 13. The UST's power is only to dismiss the case. What they usually offer, is a conversion to Chapter 13 as an alternative. This would save the filer paying another $274 to file the Chapter 13. It's for convenience only.

Those only come under 707(b) which doesn't apply to non-consumer debtors. They can also not move to dismiss under 707(b) which does severely limit dismissals. They can object under 707(a) but I have read most courts like to limit those dissmals to 'bad faith' situations.

First 11 USC 707(a) governs both consumer and non-consumer dismissals. As I wrote, non-consumer cases are not subject to the means test in 11 USC 707(b). Remember that 11 USC 707(a) gives the Court ability to dismiss for cause. The items under (a) are only "examples".

Please don't believe for one moment that a non-consumer Chapter 7 can't be dismissed for cause. While 11 USC 707(b) doesn't apply, two things do apply. First, that's that overall power of 11 USC 707(a), which doesn't have the mechanical test of 11 USC 707(b). Second, the Court may always dismiss for cause including, but not limited to, reasons of bad faith and other factors where the filing is an abuse of the Chapter of the Code. I'll concede that ability to pay is not one of those in 11 USC 707(a).

(You're right though that the $182.50 limit does not apply because ability to pay doesn't apply... if this is done in bad faith, such as misrepresenting numbers on schedules to keep the disposable income low... this is not good.)

I wonder if your attorney has done a lot of business bankruptcies.

No, my attorney, has not. I am a business filer, but primarily consumer.

I had a 18K private school tuition bill and never heard a peep from the UST.

Depends on the UST and you only mention that it was a bill, not a payment actually made within any period where the Trustee's avoidance power could work. I don't know the point of the bill in context to this.

[whipster1]

Business 7's don't depend on ability to repay. The I/J is not applicable, although you have to fill it out. The trustee will go over the alleged business debts with a fine tooth comb to make sure they are indeed business debts.

[OhioFiler]

Let's clear some things up, because I may have said something that does not apply if this is a non-consumer case.

A UST cannot make anyone go into a Chapter 13. The UST's power is only to dismiss the case. What they usually offer, is a conversion to Chapter 13 as an alternative. This would save the filer paying another $274 to file the Chapter 13. It's for convenience only.

First 11 USC 707(a) governs both consumer and non-consumer dismissals. As I wrote, non-consumer cases are not subject to the means test in 11 USC 707(b). Remember that 11 USC 707(a) gives the Court ability to dismiss for cause. The items under (a) are only "examples".

Please don't believe for one moment that a non-consumer Chapter 7 can't be dismissed for cause. While 11 USC 707(b) doesn't apply, two things do apply. First, that's that overall power of 11 USC 707(a), which doesn't have the mechanical test of 11 USC 707(b). Second, the Court may always dismiss for cause including, but not limited to, reasons of bad faith and other factors where the filing is an abuse of the Chapter of the Code. I'll concede that ability to pay is not one of those in 11 USC 707(a).

(You're right though that the $182.50 limit does not apply because ability to pay doesn't apply... if this is done in bad faith, such as misrepresenting numbers on schedules to keep the disposable income low... this is not good.)

No, my attorney, has not. I am a business filer, but primarily consumer.

Depends on the UST and you only mention that it was a bill, not a payment actually made within any period where the Trustee's avoidance power could work. I don't know the point of the bill in context to this.

Which attorney? I can't see any attorney willing to touch you with your knowledge.

[biotechsolution]

justbroke...I apologize if I came off rather abrupt or strong.

It has just been my experience other the last few years that when it
comes to a non-consumer bankruptcy and especially when 707(b) is
taken out of the equation objections by the UST are not that often.

Unless your expenses are very excessive (expensive country club memberhips, travel expenses or other completely luxury items) they are usually not questioned. Your car payments and mortgage or rent payments
aren't subject to IRS standards, among other expenses.

I had business/tax bk, with income over 2X the mean, included 18K a year school tuition expense in my schedules and it wasn't questioned.

I had read some recent cases where the courts weren't comfortable using 707(a) for a 'totality of situation' objections, which limited the UST position on non-consumer objections.

I also meant the attorney question to be for jonance's attorney.

I am just amazed how little some practicing bankruptcy attorneys know about business/tax bk's. I started out with an attorney who filed a chapter 13 for me and had me make 6 months of payments before I was getting ready to be confirmed.

I finally started doing some reading, made the attorney dismiss my chapter 13 and I filed my Chapter 7 on my own 2 weeks after dismissing the 13.

Met with the UST right after my 341 to prempt any objections or questions.

Discharged on time. Then respectfully asked my previous attorney for all the money I paid him and an additional $1500 for money that wasn't returned to me from the plan payments. He refunded.

But it burns me up that some attorney's who don't have any business dealing with business or tax bankruptcies take them on anyway.

I graduated law school seems like a lifetime ago, practiced a little in contract law then started a new life. But I'm smart enough to know when not to take something on.

[justbroke]

justbroke...I apologize if I came off rather abrupt or strong.

Don't apologize at all. I put that $182 thing in there, and I shouldn't have. I actually got carried away and forgot the purpose of the thread.

The USTs, since they don't have that 707(b) thing to use, are rendered almost powerless, but they are not completely powerless. I think they'd rather spend their time chasing the consumer filers over spending a lot of time and effort chasing non-consumer filers because the latter is much harder to prove "bad faith".

I had read some recent cases where the courts weren't comfortable using 707(a) for a 'totality of situation' objections, which limited the UST position on non-consumer objections.

Exactly, and probably why the USTs are gun shy now. I have read similar cases where the UST tries to use "totality of circumstances" on a 707(a) motion. However, that totality of circumstances is in 707(b)(3) and that that paragraph specifically builds on 707(b). Since 707(b) doesn't apply, the UST tends to lose those types of motions.

You're right though. Unless the expenses are egregious, they'll probably fly. I actually thank you for catching my diarrhea of the mouth. Wait, that didn't come out right... err... I mean... forget it! I'm just digging a hole now!

I also meant the attorney question to be for jonance's attorney.

I was trying to have fun!

I finally started doing some reading, made the attorney dismiss my chapter 13 and I filed my Chapter 7 on my own 2 weeks after dismissing the 13.

Excellent. I like a self starter myself.

Discharged on time. Then respectfully asked my previous attorney for all the money I paid him and an additional $1500 for money that wasn't returned to me from the plan payments. He refunded.

But it burns me up that some attorney's who don't have any business dealing with business or tax bankruptcies take them on anyway.

It burns me up that I went to H&R Block for Professional Tax Service and they gave me the regular 1040 person. I had to explain to her the balance sheet and what an NOL was. Pathetic! I did all my own taxes after that, although I did have a CPA to handle the books and quarterly junk.