Increased Ch 7 scrutiny

[cr2285]

I've recently hired an attorney to handle my chapter 7. They are now on retainer and we were planning on filing around the middle of June.

I just received an email from him advising that I should file asap due to the following reasons:

1. Due to a recent decision, passing the means test does not mean the court will not try to force you into a ch 13. (I've asked him for a case number, haven't heard back yet.)

2. The US Trustee's office in my area will be hiring 5 FBI agents to investigate chapter 7 filings.

I don't doubt the information as my attorney is board certified, I'm just curious if anyone has heard the same thing.

Pipe up if you have. Thanks.

[SinkingFast]

We met with and hired our attny on March 30. He told us then the Trustees and Judge here weren't going by the Law as written on the $100 to $166/mo being 25% of debt. That the Court is just looking for a flat $100/mo disposable income. If you have that, you're going to be a Ch 13 case. He said the New Law wasn't pushing as many people into 13's as Congress had hoped for.

I'd read some time ago that things (don't remember exactly what) were gonna get stricter in August and Audits would start full scale in October.

[FoolAndHisMoney]

I've recently hired an attorney to handle my chapter 7. They are now on retainer and we were planning on filing around the middle of June.

I just received an email from him advising that I should file asap due to the following reasons:

1. Due to a recent decision, passing the means test does not mean the court will not try to force you into a ch 13. (I've asked him for a case number, haven't heard back yet.)

2. The US Trustee's office in my area will be hiring 5 FBI agents to investigate chapter 7 filings.

I don't doubt the information as my attorney is board certified, I'm just curious if anyone has heard the same thing.

Pipe up if you have. Thanks.

Not sure. I know your lawyer probably knows more then us, but I think one should file whenever they are ready to file and not rush to do so because of a possible audit or anything else. The means test will always be around, so now or a few months from now probably won't make any difference. I thought the FBI always invesigated bankruptcy fraud in any chapter. Filing now or later shouldn't really matter as long as there is no fraud then it shouldn't make any difference. Just like the IRS you can get audited all you want and if you are honest what can go wrong? Your nerves maybe shot, but you can't go to jail for being honest.

[cr2285]

Just like the IRS you can get audited all you want and if you are honest what can go wrong? Your nerves maybe shot, but you can't go to jail for being honest.

No disrespect, but we are dealing with lawyers, judges, and bk trustees that get paid on commission. They're not exactly the most upstanding bunch of people.

As far as the jail thing goes, I'll leave that one alone.

[aa06a47]

I have always heard the honest people finish last is most things, and from some of the post, I would say that is including bankruptcy. I think if your honest, there is nothing anybody can do to throw you in jail. The problem is, the unknown....everybody has a skeleton or two in there closets, even if they don't know about them. I do believe though, if your honest, your BK will pass any investigation.

[Rover]

I don't believe your attorney.

The US Trustees office doesn't hire FBI agents. The FBI does that. The US Trustees office has always been able to engage the help of as many FBI agents as are available to investigate fraud.

Perhaps, this attorney's business has slacked off a bit and he's just trying to accelerate his income stream. (An attorney wouldn't do that, would he?)

While there may be a slowdown in current BK filings, I've got a feeling that by the end of this year, for a variety of reasons, the rate of BK filings will be increasing markedly and the US Trustees office will be overwhelmed to the point where it will be difficult for them to administer the new law as fully as they might want.

So, it may very well be that one should hold off on filing BK until later this year.

[aa06a47]

Rover, if you have nothing to "hide", you might as well get the process moving. No need to wait if you have nothing to hide. And if you do have something to hide, I doubt work load will be much of an issue with the trustee's, they take there time anyways.

[FoolAndHisMoney]

I heard Tom Delay say last week that with all his trouble he hired his attorney to investigate him as if it were the DOJ investigating him and they found nothing. I have no opinion on him good or bad even though he's a Politician. The point is that the one thing I do like about bankruptcy reform is that since lawyers are liable for a clients wrong doing they probably will audit and investigate you just as the DOJ/UST will so they will give advice as to what "unknown skeletons in the closet" one may have.


I do agree with Rover that some attorneys will say anything to get your business NOW in case you change your mind.

[Rover]

Rover, if you have nothing to "hide", you might as well get the process moving. No need to wait if you have nothing to hide.

That's simply not true. I can think of several situations when it would be a mistake to rush a BK filing when one has nothing to hide.

For example, if one thought that there was a good chance that they would be incurring additional bills (e.g., medical expenses), one would want to wait until those bills were incurred before filing BK.

If one were judgment proof, which it appears that many who visit this forum would be, why rush into BK?

Since one can only file Ch 7 once every 8 years, I think that one should not file until it's absolutely necessary for some reason. I don't think that things like ending creditors calls are a sufficient reason for filing too soon.

There's a book How to Settle Your Debts by Norman Perlmutter that advocates BK only as a last resort. The book makes some good points. The author states that "most people who file bankruptcy don't need to." He makes some good points and sets forth some alternate strategies. Perlmutter seems to feel that filing BK is a very onerous thing. I'm not sure that I totally agree with him, but I do agree that there are a lot of other things that should be explored before filing.

[SinkingFast]

That's simply not true. I can think of several situations when it would be a mistake to rush a BK filing when one has nothing to hide.

For example, if one thought that there was a good chance that they would be incurring additional bills (e.g., medical expenses), one would want to wait until those bills were incurred before filing BK.

If one were judgment proof, which it appears that many who visit this forum would be, why rush into BK?

Since one can only file Ch 7 once every 8 years, I think that one should not file until it's absolutely necessary for some reason. I don't think that things like ending creditors calls are a sufficient reason for filing too soon.

There's a book How to Settle Your Debts by Norman Perlmutter that advocates BK only as a last resort. The book makes some good points. The author states that "most people who file bankruptcy don't need to." He makes some good points and sets forth some alternate strategies. Perlmutter seems to feel that filing BK is a very onerous thing. I'm not sure that I totally agree with him, but I do agree that there are a lot of other things that should be explored before filing.

I agree with you that some people who come here contemplating BK just don't need to file. And we tell them that.

Had a young guy here over the weekend. $10K in debt and a sizeable car payment. Half the debt was a loan to a friend that was not being paid back. There was an agreement in writing. The guy can go to small claims court over that. He can also sell the car and get something cheap to tide him over until he can pay off the other debt. He agreed that he did not need BK but he just hadn't been able to think of alternatives on his own.

Waiting for some big expenses you know are coming,....... Well that's a bit different. If you know you're going to file BK and you incur those expenses anyway, that's fraud. At least it is to me. But the attnys will say, "You might as well get it done and include it since you're filing anyway." At the end of the day, you have to face your conscience about what you've done.

Called a Creditor yesterday. After we played the "we need $X to bring your acct current, will you be sending that?" and "What can you pay?", I told the gal we were filing BK. She said have you considered alternatives before making this decision? Like working with a Credit Counseling Agency to set up a payment plan for you? I said Yes. We did have a DMP figured, as a matter of fact. And the payments were $100/mo + fees more than our current minimums were. We looked for alternate ways to not have to file BK. We even asked the Creditors to help us. They wouldn't.

BK is the new toy. The reforms aren't pushing as many people to 13 payment plans as they had hoped, in theory. So now the US Trustee's office is working people to scare them. Maybe there are additional FBI agents available. I don't care. I don't have anything to hide. It's all gone. Sold for money to get as long as we lasted.

I relayed what my attny said in the Consult, but I'm not even worried about that. I can show us negative each month on paper. I'm not an attny and didn't even used the Schedules allowables in some areas. So I know the attny could show us negative on paper each month as well.

Just like others have said,......... If you don't have anything to hide, it won't matter when you file.

[edwards2]

amen sinkingfast....I totally concur...if you dont have anything to hide...file when you need to and if you need to. As for hiring FBI agents I dont believe that either. Of course they are at the disposal of the U.S. Trustee - that goes w/o saying. BK is, and should be, a last resort.

[FoolAndHisMoney]

That's simply not true. I can think of several situations when it would be a mistake to rush a BK filing when one has nothing to hide.

For example, if one thought that there was a good chance that they would be incurring additional bills (e.g., medical expenses), one would want to wait until those bills were incurred before filing BK.

If one were judgment proof, which it appears that many who visit this forum would be, why rush into BK?

Since one can only file Ch 7 once every 8 years, I think that one should not file until it's absolutely necessary for some reason. I don't think that things like ending creditors calls are a sufficient reason for filing too soon.

There's a book How to Settle Your Debts by Norman Perlmutter that advocates BK only as a last resort. The book makes some good points. The author states that "most people who file bankruptcy don't need to." He makes some good points and sets forth some alternate strategies. Perlmutter seems to feel that filing BK is a very onerous thing. I'm not sure that I totally agree with him, but I do agree that there are a lot of other things that should be explored before filing.

Well said Rover! The heart and soul of bankruptcy reform was to encourage debtors to make it an absolute LAST resort if possible. Bankruptcy while a tough decision to make is usually one's first reaction and they(courts) want it to be the last. Not judging anyone, if you have to, you have to.

I want to read the book you mentioned because I would much rather settle my debts for pennies on the dollar to avoid the stress of bankruptcy. I read too that if you have a good attorney you can outright give a creditor that you owe 10k just $500 bucks to go away since they will get nothing anyway in bankruptcy and the $500 is better then nothing. The problem with all this though is how do you beat the 1099 you will be mailed. Most of us will be back here with all the income taxes we will owe by settling. I heard Dave Ramsey say the same thing to a caller last week to avoid bankruptcy by negotiating. How do you avoid the taxes though?

[no_it_all]

<snip>The problem with all this though is how do you beat the 1099 you will be mailed. Most of us will be back here with all the income taxes we will owe by settling. I heard Dave Ramsey say the same thing to a caller last week to avoid bankruptcy by negotiating. How do you avoid the taxes though?

Assume your credit liability is 85K. If you are insolvent to the tune of 85K when you make the arrangement with the creditors, your tax liablity is effectively zero. If you are insolvent to the tune of 50K, your taxable income on the 1099-C would be 35K.........The strategy would be to keep the 1099-C amounts under your insolvency number.

[FoolAndHisMoney]

Assume your credit liability is 85K. If you are insolvent to the tune of 85K when you make the arrangement with the creditors, your tax liablity is effectively zero. If you are insolvent to the tune of 50K, your taxable income on the 1099-C would be 35K.........The strategy would be to keep the 1099-C amounts under your insolvency number.

And this is legal?

[SinkingFast]

The trick is, you gotta get the IRS to agree with you.

Like applying for an OIC. You can offer a payment plan, but the IRS has to agree. If it's not the terms they typically offer and accept, you must get approval. Several people here have offered non typical plans that were accepted, so they comment it's easy to do. We haven't heard from people who's proposed plans were not accepted.

It's like doing your taxes. You file, you get a refund almost immediately, but 2 years down the road, the IRS sends you a nice little letter saying, "We have questions about tax year 2005." We were audited and it went smoothly. We personally know other people where that wasn't the case. With the IRS, it ain't over til it's over.

You file the forms to prove insolvency, but the IRS must agree with you. Until the IRS agrees, it's not official.