Need peer review. I have a client with a failed business. Business dissolved last year leaving him with nearly $1 million in unsecured debt. Client now works a regular W-2 job paying about $4,000 per month. After completing schedules I & J on the bankruptcy petition, he has about $800 per month left over. This potential bankruptcy is 95% business debt so the means test does not need to be completed. But what about the $800 surplus remaining at the end of each month? Normally the monthly $800 surplus would go to pay creditors, but he cannot file Chapter 13 because his unsecured debt is more than $419,275. If he files showing a $800 surplus remaining at the end of the month, will this be considered abuse or bad faith? Any ideas?
Double and triple check expenses. Will he have taxes or student loans due after discharge? Is his budget for food, clothing, etc. unrealistic? I find clients often underestimate expenses. Also, have the client closely examine Schedule J for missing expenses.
Please note this is to be considered general advice and not legal advice about any particular situation. The answering of any question does not create an attorney client relationship and does not make the answer specific legal advice. I am an attorney admitted to the practice of law in the state of Georgia. Â
First, I agree with Mr. Adkins and suggest that the client be pretty liberal with expenses. As his debt is mostly business debt, and the trustee cannot justify moving to convert the case to a chapter 13, then they are less likely to scrutinize higher expenses. Expenses such as home maintenance, food, personal care, clothing, etc. can have a wide range of correct answers, and debtors in financial trouble often give low estimates of these amounts because they have not been able to afford much of them in the past. I often see debtors listing $300 for food, because it sounds good, not realizing that this means only $10.00 per day.
The above information is general in nature. In order to obtain more specific legal advice upon which to base your important decisions, you should consult with an attorney in person and retain one of your choosing. Robert M. Gardner, Jr. Gardner Law Firm
The schedule J expenses should be reviewed and examined, line by line. If this schedule shows the debtor’s true monthly budget, the surplus may disappear, or get greatly reduced.
You ought to consider joining the Facebook forum for bankruptcy lawyers called Bankruptcy Caselaw Updates and News to get an answer to this kind of question. Or get a local mentor. As a professional, I would be embarrassed to post a question on a consumer based help site, even if it was done anonymously. It sort of makes us all look like fools. Hope this perspective helps!
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