Presumption of Abuse letter after 341 (Ch 7).

[Anonymous]

Well, that wasn't a fun letter to receive.

We filed Chapter 7 in October. We have a great attorney, passed the Means test (but just barely, like by a few hundred dollars), had our 341 hearing in November. All was good...we thought. Then we just got a letter stating that there is a Presumption of Abuse for our case, based on income. 

It's a holiday weekend so our attorney's office is closed and we are so frustrated with this. Really????? We passed the means test!

Has anyone else been through this? Converting to a 13 would NOT be a good situation for us - we already have a house underwater in a different state and in foreclosure.

If you have, what kind of outcome did you experience?

[StartingOver10]

This is why you have an attorney to fight this kind of battle for you. I too had income greater than the mean for my state and had to go through what ended up being two 341 meetings, but my attorney went to bat for me. I provided my attorney with all the documentation he requested and he was able to keep my Bk a Ch 7.  You and your attorney are in this together.

[Anonymous]

Thank you - that is encouraging. I hope that we are able to stay in Chapter 7 - a 13 would kill us financially, even more than we were before filing.

[StartingOver10]

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@Anonymous wrote:
Thank you - that is encouraging. I hope that we are able to stay in Chapter 7 - a 13 would kill us financially, even more than we were before filing.

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I was in a similar position - a Ch 13 would have been impossible. But the documentation I had to provide was much, much more extensive than  what I see people post here. I had to provide 10 years of real estate purchases and sales and years of bank statements etc. My paperwork was extensive, but it kept me in a Ch 7 rather than an asset Ch 7 or a Ch 13. My 341s were long too - not the five minutes I read about. Fortunately I had everything they needed to see to get a discharge. But I am very thankful that I had a good attorney - he was the one that was able to show the trustee that I had no assets and there was no presumption of abuse.

[pizza1]

It will be ok... Contact attorney ASAP when back in office, he will know what to do. You think that's bad, I had TWO trustees on my case, because I got flagged just for having a Tiffany &CO credit card, which very few people have and file BK7. So that prompted a second trustee from the Feds... A US federal trustee. After the BK trustee looked at everything, he had to sen it over to the fed trustee so he could fine tooth it. I barely got out alive... Barely, you'll be fine lol

[cf2701]

I completely understand your situation.  I was in the same boat.  My wife and I filed Ch 7 and were "lucky" enough to get selected for an autit by the Feds and got pushed  to Ch 13 AFTER we had our 341 meeting for Ch 7.  After the 341 hearing even our attorney assured us it was ok and not to stress, that the chances were VERY slim.  Well, we didn't make it. They used everything they could (by law) and in the end we had to go Ch 13.  We only missed it by literally, $20 or so.  It was heartbreaking at the time.

I have to admit, it is frustrating to see others who appear to have similar circumstances and similar income qualify for Ch 7 and get a free clean slate, when others end up paying in Ch 13 for 5 or so years.  

Now to the positive side.  Even Ch 13 is wonderful and useful. At the end of the day you have to step up and understand that the debit is yours to own and a Ch 13 is MUCH better than no help at all.  So I try to keep a positive attitude when that check is written every month.  Life will be so much better in a few years and you just have to keep your eye on the big picture and learn from past mistakes.  (At least that's my perspective, I know we all have our own reasons for being in the situations we find ourselves in, some no fault of their own. I honestly can't say that was my situation - I was just careless, young, and short-sited)

I wish you all the luck in the world and remember, even if you have to migrate to a Ch 13 - its not the end of the world.  You will still get relief.

[Anonymous]

Thank you for your responses, and encouragement. We were able to talk to our attorney on Monday and she assured us that she sees this occur in about 90% of her cases, as she deals with higher income situations. Although she feels we should be fine, the requests for additional documentation have started. Re-submitting our townhome lease, re-submitting proof of our car payment amounts, more paystubs, etc. It's hard not to feel anxious about this when the outcome seems shaky.

I think we feel the same way about our situation at times too, with respect to watching it work well for others and being the ones who get "flagged". I can honestly say we tried everything in our power to manage it all - and have learned some very valuable lessons that we will utilize in the future.

[Anonymous]

Back to update. We hadn't heard anything new and our discharge date was supposed to be next month (January). But then yesterday, we received another letter which is a motion to DISMISS our Chapter 7, with a hearing scheduled two days after our discharge is supposed to be filed. Again, trying to get ahold of the attorney to figure out what is happening.
This is so frustrating and stressful.

[TRC_WA]

Sounds like you make too much money.

I had no idea what presumption of abuse is... so I googled it.  Not sure how relevant this dated link is now...

http://www.bankrate.com/finance/debt/chapter-7-versus-chapter-13.aspx

For those unfamiliar with the bankruptcy process, a presumption of abuse typically arises when a debtor's income exceeds the median income of all individuals in the debtor's state. Or the debtor lists expenses that exceed permissible expenses. The United States Bankruptcy Trustee presumes that the debtor is trying to abuse the bankruptcy system and notifies the debtor by sending a presumption of abuse letter.

When you have income above the median income for the state you live in, you must pass the "means test." In general, this test is used to see if your income available for debt repayment over that five-year period is $10,000 or more, then Chapter 13 will be required. In other words, anyone earning above the state median, and with at least $166.67 per month of available income, will automatically be denied Chapter 7. So, for example, if the court determines that you have $200 per month income above living expenses, $200 times 60 is $12,000. Because $12,000 is above $10,000, you're stuck with Chapter 13.

After reading that I can totally see why my attorney told me I had to file Ch 13 back in 2009 despite the fact I only made $37k at the time in a low cost of living state... Georgia.  I obviously had too much money left over.

Best of luck OP.

[Anonymous]

Well, that's the thing though - we don't make too much money. We passed the Means test, and our income actually just went down by about 35K per year. We went through an attorney and ran the means test twice, as the first time we passed but were near the cutoff point, and then we had some payments shift for our cars and that pushed us further up with expenses. So, then we passed the means test with even more room to spare.

Having this drag out and not knowing what to expect is tough.