What Happens If I File Chapter 7 And The Trustee...

[backtoschool]

My debts are considered mostly consumer since the largest debt is my residence and thus is greater than 51% of the rest of my debts. So, I have to qualify based on the means test for a 7. I have been told I will because I can deduct my secured payments, but I am not planning on keeping my residence so there is a chance that the trustee will try and knock my house payment down and claim it's excessive. If successful in doing so, trustee could file a motion to dismiss and then I couldn't file a chapter 7 or a chapter 13.

As far as the nature of the debts, they are mostly the same as everyone else here just on a slightly higher level I suspect. Nearly 2 million in secured debt for real property and autos.

Some of unsecured debt was acquired foolishly trying to keep things afloat (I thought things would turn around...) when things started to turn south in 2008. About 150k of it though was typical consumer stuff like vacations and what not and the rest was probably life support for my business. You can truly be broke at any level. Yes, I am an idiot. I have been paying 5k per month on the unsecured debt for a while now, but I can't do it any longer. My income is dramatically going down. I made 40k in December, 23k in January, 13k in Feb, 9k in March, 9k in April, 7k in May and probably about 8-9k I suspect in June. Clearly my income is decreasing at a rapid rate and I can't support the nearly 20k in monthly payments I have on everything.

I feel like the trustee is going to look at my life and see all this excess and deny me a 7 and then I won't qualify for a 7 or a 13 and I will be screwed. My attorney doesn't seem worried, but I am not sleeping. The truth is I have nothing and I can't pay everyone back. When business was good, I thought the 30k months of income would continue and I could pay everything back no problem. Well, we see how that turned out.

Any guidance or helpful tips would be appreciated. I don't see my income returning to the previous levels anytime soon.

If your secured payments are more than the average for your area based on IRS standards, then the US Trustee will dismiss your case under "totality of circumstances". You cannot have a $10,000 a month mortgage, a $900 a month car payment, etc and claim a chapter 7. The US trustee dismisses cases where monthly secured payments are too much over the irs norms, using the rationale that those secured items could be turned in or sold and lower priced items could be purchased, leaving money for creditors.

[UWFan]

My debts are considered mostly consumer since the largest debt is my residence and thus is greater than 51% of the rest of my debts. So, I have to qualify based on the means test for a 7. I have been told I will because I can deduct my secured payments, but I am not planning on keeping my residence so there is a chance that the trustee will try and knock my house payment down and claim it's excessive. If successful in doing so, trustee could file a motion to dismiss and then I couldn't file a chapter 7 or a chapter 13.

As far as the nature of the debts, they are mostly the same as everyone else here just on a slightly higher level I suspect. Nearly 2 million in secured debt for real property and autos.

Some of unsecured debt was acquired foolishly trying to keep things afloat (I thought things would turn around...) when things started to turn south in 2008. About 150k of it though was typical consumer stuff like vacations and what not and the rest was probably life support for my business. You can truly be broke at any level. Yes, I am an idiot. I have been paying 5k per month on the unsecured debt for a while now, but I can't do it any longer. My income is dramatically going down. I made 40k in December, 23k in January, 13k in Feb, 9k in March, 9k in April, 7k in May and probably about 8-9k I suspect in June. Clearly my income is decreasing at a rapid rate and I can't support the nearly 20k in monthly payments I have on everything.

I feel like the trustee is going to look at my life and see all this excess and deny me a 7 and then I won't qualify for a 7 or a 13 and I will be screwed. My attorney doesn't seem worried, but I am not sleeping. The truth is I have nothing and I can't pay everyone back. When business was good, I thought the 30k months of income would continue and I could pay everything back no problem. Well, we see how that turned out.

Any guidance or helpful tips would be appreciated. I don't see my income returning to the previous levels anytime soon.

[backtoschool]

In your situation, the US trustee will most likely be involved, and the US trustee will push for a conversion to a chapter 13 or 11, citing presumption of abuse. The US trustee's line of thought will most likely be that if you have the money to pay for that much secured debt, then some of that property can be sold to pay your other creditors. If you are not walking away from the secured property, but are trying to hold on to it, then the US trustee will certainly look at a totality of your circumstances and argue that your assets, and income will allow you to pay off a sizable sum of money to your creditors if you sell some of your assets and/or re-organize. I do not see a chapter 7 as a likely choice unless your property is valued at the mean for your area, per irs standards, etc....

Is your attorney a seasoned bankruptcy attorney? Your case seems very likely to attract the attention of the US trustee, and I hope you are getting good advice from your attorney that a chapter 7 is not going to be straightforward or easy in your case.

[nc73]

A chapter 11 basically is for a business.

I must say with what you owe, you are out of my league. It is/was my understanding that if you were bk meat, that either a 13 or a 7 was possible under a personal financial situation. Perhaps I'm wrong but maybe you could even elaborate on this? 'Hub

Individuals can also do an 11.

[nc73]

Yeah, so if it gets dismissed, what does that mean as far as long term implications? Can you refile at a later point? Am I prohibited from filing again if it gets dismissed? I heard chapter 11's are very expensive. I don't have the 20k+ to fund a chapter 11 right now. Thanks for the responses BTW.

The crappy thing too is that since I have 250k unsecured debt right now, if my property forecloses, I will have another 250k unsecured debt for the second hanging around which pushes total unsecured to about 500k, which means I will still not be able to qualify for the 13. Looks like I am in a tough little bind here. Hope like hell I qualify for the 7.

I think it's a 6 month wait after dismissal.

[AngelinaCatHub]

I'd think you'd get dismissed but what about a chapter 11?

A chapter 11 basically is for a business.

I must say with what you owe, you are out of my league. It is/was my understanding that if you were bk meat, that either a 13 or a 7 was possible under a personal financial situation. Perhaps I'm wrong but maybe you could even elaborate on this? 'Hub

[iv65536]

Another question would be the nature of the debts - if they are primarily non-consumer, then the means test is irrelevant.

[UWFan]

Yeah, so if it gets dismissed, what does that mean as far as long term implications? Can you refile at a later point? Am I prohibited from filing again if it gets dismissed? I heard chapter 11's are very expensive. I don't have the 20k+ to fund a chapter 11 right now. Thanks for the responses BTW.

The crappy thing too is that since I have 250k unsecured debt right now, if my property forecloses, I will have another 250k unsecured debt for the second hanging around which pushes total unsecured to about 500k, which means I will still not be able to qualify for the 13. Looks like I am in a tough little bind here. Hope like hell I qualify for the 7.

[UWFan]

Here are the actual figures. They might have been update in 2010, but they are probably close to these levels:

Pursuant to 11 USc 109(e), chapter 13 relief is not available to debtors with unsecured debt higher than $336,900 or secured debt higher than $1,010,650.00.

[nc73]

I'd think you'd get dismissed but what about a chapter 11?

[UWFan]

As far as I know there are limits for a chapter 13. It's a little less than 350k unsecured and a little over a million for secured debts. I have close to 2 million in secured and about 250k unsecured. So, if I don't qualify for a 7, I might not qualify for the 13 either.

I feel decent about qualifying for the 7, but if I don't for some reason I want to know what happens then.

[nc73]

I thought as long as you can fund a 13 you can file a 13. How much is too much secured debt??

[UWFan]

Files a presumption of abuse, tries to push for a 13, but I don't qualify for a 13 because I have too much secured debt?

I am planning on filing a chapter 7. I am well over the median in income, but I can qualify per my attorney because I have some lofty secured debt payments.

I have seen cases where the trustee has tried to drop the secured payments down and not give credit for the full amounts. If that happens to me, I would no longer qualify for the 7. At that point, most people get pushed into a 13. Well, what happens when a person doesn't qualify for a 13 because they have too much secured debt?

Can your case be dismissed and if so can you refile later.... My income is declining monthly. Eventually I may be able to qualify for a 7 under the median. I guess I am just wondering what happens if I am ruled ineligible for a 7, but don't qualify for a 13. I have this question in to my attorney, but she is out of the office for a few days and I want an answer before she returns if possible.

Thanks.