Chapter 7 business debtor - Schedule I & J questions

[jonance]

Thanks for the post...I am not filing for at least 6 months so i don't think it will be last minute. Also, i am not going to get a huge number, just maybe $100 or so each for my wife and I. I also have to get a new car, as my '96 explorer is done....

One thing that is a bit confusing to me is whether they can question expenses of my non-filing wife. I think my attorney is just trying to be cautious. Obviously i can get a car, but not a $30k car, but then again my wife is getting the loan in her name only. I'm getting a Kia Sportage 2008 for $15k. 3 year loan in her name only. Well since she isnt' filing...couldn't she get a Porche if she wanted to? She has no debt at all. How can they tell her what she can have...she makes her own money, isn't filing, and has no debt.

[DeadManCrawling]

It is trustee specific, and depends on other factors.

I have 400 a month in life insurance. Term policy. But, I have had this policy for 8 years. It can make a difference, depending on the trustee.

A last-minute policy for a large number will come under greater scrutiny, for obvious reasons. My attorney says that since mine has been a very long-term policy we will have no trouble.

A lot of people, in many districts, attempt to use last-minute policies to reduce DMI. Trustees don't care for this tactic. I would look at other ways to reduce DMI. There HAVE to be some, for nearly everyone.

[biotechsolution]

I ended up actually negative on my DMI.
If I remember right it was something like.
$1600 child support
$1800 tuition/child care
$1000 auto expenses
$1500 business expenses
$3500 mortgage
$1000 utilities/phone
$600 insurance (car/home/life)
and I think there was another $1000 or so to include
recreation and all the personal expenses, including health care.

I think I was a little over $12000 in expenses and $11500 in take home pay.

[jonance]

I do understand that. It will depend from case to case. That's what i find a bit ridiculous though. There should be some consistency or set rules in case law. Why should you have to go through something as nerve racking as bankruptcy not knowing where you stand?

Anyhow, I would love to know his DMI. If he didn't show much or showed a fair amount. I had to quit doing web design for awhile (at the advice of all 3 attorneys) b/c i was making an extra 20k year on that. That would have put my DMI at about $3000. I still work my main job and they can't make me work a 2nd job so that is fine. My non-filing wife and I were still at around $1100 DMI though when I first met with the attorney. My wife is buying a car with a loan, we're getting life insurance, probably will get a loan on her paid off car (short term with a high monthly payment). She even suggested tithing as she knows they can't question it. The whole reason for all of these things is to lower the DMI. After discharge, I will likely pay off all those loans early, resume web design, and move on with life.

[justbroke]

Well my confusion lies in the fact that all of the attorneys i have spoken with feel that even $400 or $500 of DMI on I & J might pose a problem for me. They fully understand i'm non-consumer, and that i am exempt from the means and 707, but I have asked them all point blank and they feel the UST can push for a dismissal or conversion to 13 if i show income there. A few threads here reflect that also......I don't know what to believe really?

As I posted earlier.... this nuance is Trustee specific. In biotech's case, the Trustee didn't seem to care about any of his "expenses". However, I wonder if biotechsolutions can tell us what his disposable income was?

[jonance]

Well my confusion lies in the fact that all of the attorneys i have spoken with feel that even $400 or $500 of DMI on I & J might pose a problem for me. They fully understand i'm non-consumer, and that i am exempt from the means and 707, but I have asked them all point blank and they feel the UST can push for a dismissal or conversion to 13 if i show income there. A few threads here reflect that also......I don't know what to believe really?

[justbroke]

I would say that at an extreme level, DMI has to be a factor even in non-consumer cases. Lets face it, if you have $20,000 in debt, and you have $5k a month in DMI, should you be able to file?

While ability to pay can't be considered, a $5K DMI could be considered an "abuse" of the provisions of Chapter 7. But, as biotech wrote earlier, those types of issues may really be around "ability to pay" and that's not a criteria in the majority view. But, I agree... that much DMI should be considered an abuse.

[signal]

I would say that at an extreme level, DMI has to be a factor even in non-consumer cases. Lets face it, if you have $20,000 in debt, and you have $5k a month in DMI, should you be able to file? I would say no, because you are not in distress, you can easily pay the debt off in four months, and to file would be in my opinion abuse of the system. I am not sure if these are in fact considerations, this is just myself thinking there has to be distress of some kind, there has to be a genuine need to file BK, and lets face it, DMI is a very key indicator on whether or not someone needs to file BK.

[jonance]

Thanks for the discussion....you guys are very helpful. The confusion I still have is this:

It seems they cannot question your expenses as much, which is why i do wonder why my attorney wouldn't just put in my actual life insurance once I get it, etc. I do know what we're doing, I think we're just trying to get my expenses up to make my case alot less likly to draw scrutiny. She does have some experience b/c she called the UST (main one in the district) and he told her they really aren't looking that hard at the expenses on non-consumers. But she did say that they could still force me into a 13 if i show a large amount of disposable income.

If I had simply done nothing, i would have shown about $1000 in DMI. Neither the lawyer I have decided to go with, nor the other 3 that I spoke with (including one primarily chapter 11 business BK attorney) thought that would make it through. THere is apparently some sort of other part of the code they can use to put me in a 13 even if i am non-consumer.

Do you guys agree with that? Biotech, you say they are hamstrung as far as questioning expenses....but if you have $1000+ in DMI, the general consensus by all of my attoneys I have spoken with (all smart with good reps) seems to be that we need to narrow the gap between I & J before filing. None of them, however, have said it has to be $182.50 or less. But they all want to get to around $200 just to be safe.

It's really annoying to me that it is so ambiguous. Why shouldn't I be able to enter bankruptcy "protection" knowing that my case can succeed? Why in the world isn't there a number the DMI can be at for non-consumers? SouthernBelle didn't you have about $400 in DMI when it was all said and done? My lawyers don't seem comfortable with that. Are there case law examples of non-consumer debtors sailing through a 7, post 2005, who had a ton of disposable income? I like that my attorney is being cautious, b/c you only get one shot, but solid answers would be nice.

[signal]

Of course, what would US law be without clear ambiguity for lawyers and courts to argue over

[justbroke]

Justbroke, or anyone else, what is the specific reference/sections in the US bankruptcy code that speak of business debtor, and specifically where it says that for business debtors 707(b) doesn't apply? I am not questioning it, I am just trying to read through the bankruptcy code, especially sections I feel may be applicable to my case, so that I can "try" to sanity check things with my case as they happen.

It doesn't talk specifically about a "business" debtor. What it does do in 707(b) is say that in the Trustee can use 707(b) to dismiss in primarily "consumer" cases.

11 USC 707(b).... may dismiss a case filed by an individual debtor under this chapter whose debts are primarily consumer debts...

[signal]

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.

Justbroke, or anyone else, what is the specific reference/sections in the US bankruptcy code that speak of business debtor, and specifically where it says that for business debtors 707(b) doesn't apply? I am not questioning it, I am just trying to read through the bankruptcy code, especially sections I feel may be applicable to my case, so that I can "try" to sanity check things with my case as they happen.

[southernbelle]

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

I also filed a business Chapter 7. My salary was over the means and I filed using expenses I expected to be questioned (like voluntary retirement and cable tv) and they were never questioned by the TT or UST and I received my discharge on time.

Thanks again biotech and HHM, you guys were lifesavers!!!

[justbroke]

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

I was joking. I hate my attorney. I wouldn't recommend him to anyone.

[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.