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socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 34358
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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I filed through my attorney Chapter 7 bankruptcy for unsecured

Customer Question

I filed through my attorney Chapter 7 bankruptcy for unsecured credit card debt. Two weeks after attending my 341 Meeting of Creditors, I received a statement of presumed abuse letter from the US Bankruptcy Court [704(b), 707(b)]. My attorney did not advise me of the possibility of such a letter.

My question is: what are my options after receipt of this letter? I'm assuming that this letter means that the Trustee did not find in favor of a Chapter 7 filing. Therefore, will I at least have the option of converting to Chapter 13 instead? Or, could this be a precursor of a complete dismissal, in which case, would I be responsible for the entire debt load in full?
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  Phillips Esq. replied 1 year ago.

Hello: This is PhillipsEsq. I am a licensed Attorney and I will be assisting you today.

 

 

Could you explain a little more?

 

Have you spoken with your Attorney?

Did you pass the Mean Test?

Did you have excess income on Schedule I? That is, is your income on Schedule I much more than your expenses on Schedule J?

Customer: replied 1 year ago.

1. I gave all of my (and my husband's) financial information to my attorney. She said that I "barely qualified" for Chapter 7, but that I was still eligible.


 


2. I don't know. I have been unemployed for 2+ years. My husband works, but our bills & utilities stretch beyond what he earns.


 


3. According to the attorney, no.

Expert:  Phillips Esq. replied 1 year ago.
Thank you for the information.


What were you expenses on?
Customer: replied 1 year ago.
Relist: Other.
Too short, vague questions. Need accurate information for peace of mind.
Expert:  socrateaser replied 1 year ago.
Hello,

Different contributor here. Please permit me to assist.

The letter references to Bankr. Code 707(b) and 704(b) indicates that you did not pass the means test. A debtor that cannot qualify for Chapter 7 has a nearly absolute right to convert to Chapter 13. The limitations are: (1) the right does not survive a previous conversion to Chapter 7; and (2) the requirement in § 706(d) that the debtor be eligible to proceed under the chapter to which conversion was sought.

The typical reason why a debtor cannot qualify for Chapter 13 is that his or her total debts are too great. Total non contingent, liquidated secured debt must be less than $1,149,525 (and liquidated unsecured debt less than $383,175 for an individual debtor) for an individual debtor and spouse to be eligible for Chapter 13 relief. Bankr. Code 109(e).

Assuming that your total debt is not too great, you will almost certainly qualify for a Chapter 13 conversion.

Hope this helps.
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 34358
Experience: Attorney and Real Estate Broker -- Retired (mostly)
socrateaser and other Bankruptcy Law Specialists are ready to help you
Customer: replied 1 year ago.

Appreciate the response. After her review of my financials, if I did not pass the means test, how could my licensed attorney (Texas) submit Chapter 7 papers on my behalf?


 


The debt is completely in my name and I filed alone. My husband (of less than 2 years) is the lone earner in our household. I haven't worked in 2+ years, and have been suffering from fibromyalgia and PTSD. While he makes a satisfactory living, he makes just enough to pay our monthly expenses, but little else, and we're often overextended. What is our worst-case scenario after receiving this letter? What if I'm also not granted Chapter 13 relief? Will the courts decide that I need to pay all my creditors in full despite not having income of my own?

Expert:  socrateaser replied 1 year ago.

Appreciate the response. After her review of my financials, if I did not pass the means test, how could my licensed attorney (Texas) submit Chapter 7 papers on my behalf?


A: Frankly, I don't know. Most attorneys who routinely handle consumer bankruptcies, have software applications where the attorney's paralegal plugs in the debtor's financial info, and the system won't generate the petition and schedules unless the debtor passes the means test.

If the forms were filled in by hand, then someone could have made a calculation error. That would be my bet.

The debt is completely in my name and I filed alone. My husband (of less than 2 years) is the lone earner in our household. I haven't worked in 2+ years, and have been suffering from fibromyalgia and PTSD. While he makes a satisfactory living, he makes just enough to pay our monthly expenses, but little else, and we're often overextended. What is our worst-case scenario after receiving this letter? What if I'm also not granted Chapter 13 relief?

A: Okay, so now we're getting somewhere. You probably have too much income for Chapter 7 because of your community property interest in your spouse's earnings, but not enough income for a Chapter 13 unless your spouse files a joint bankruptcy. Payments regularly made by the nonfiling spouse for household expenses must be included in the debtor's “current monthly income.”

 

The trustee has probably determined that your spouse is paying all the bills, and so that's all your income, which disqualifies you for Chapter 7 -- but at the same time, it's probably not enough for Chapter 13, because it does not represent all of your disposable household income.

 

Will the courts decide that I need to pay all my creditors in full despite not having income of my own?

 

A: See above. You need to talk to your spouse about filing a joint Chapter 13 bankruptcy petition. Otherwise, I think you may be dismissed completely from the bankruptcy, because you won't be able to qualify for a Chapter 13.

 

Hope this helps.

Customer: replied 1 year ago.

Thank you so very much. Your information makes a lot more sense than my attorney's advising. I will speak to her on Monday, but right now I'm very concerned. My husband absolutely cannot file jointly because he is in the process of repairing his credit from a previous marital disaster.Even though he still has credit card debt, his credit is what we use to rent a place to live, appliances, utilities, etc. Therefore, If I do not qualify for chapters 7 or 13 alone, and my case is dismissed by the trustee, how do I go about settling with all of my creditors directly?

Expert:  socrateaser replied 1 year ago.
Before we start talking about how to settle in the event that your bankruptcy is dismissed, find out from your lawyer what's really happening with this presumption of abuse letter.

We've been doing a lot of speculation here, and if we're wrong, then trying to speculate about a next step may be all in vain.

However, my next suggestion would be that you let your bankruptcy dismiss, file for divorce, and then once divorced, file for Chapter 7 again.

The automatic stay would terminate after 30 days, but it won't matter because you won't have any assets or income, so your creditors won't be able to reach anything. And, your current spouse's income and credit will be unaffected because you will be divorced.

This may not seem like the best route at the moment, but if all else fails, it's probably the fastest way to "right" the "financial ship."

Hope this helps.

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