This one doesn’t, unless readers can help me find it.
But it was a prickly case that resolved well, for unanticipated reasons. Perhaps, there’s a lesson lurking somewhere here.
The clients were well above median income: a high tech engineer and a stay at home mom with two children under 9.
The major creditor was the contractor whose remodel of their house caused them ultimately to lose the house. Rumor said the contractor’s partnership broke up over the botched project as well.
Net, net, net, emotions ran high.
After an unsuccessful attempt at a Chapter 13 case, we dismissed and filed Chapter 7. The intent was to let the house go. But the secured debt on the house was an available deduction on B-22, in 7 anyway.
Enter the UST who brought a motion to dismiss under §707(b)(3). She had a laundry list of disputed expenses, including appropriate care for two children with learning differences and sports and music lessons. She also seemed offended at a mother who wasn’t in the workforce.
The hearings on the issue extended over months, with the judge apparently leaning our way, but looking for deeper record on some of the issues.
The frustrating thing for me was that there seemed to be no settlement possibilities available. Chapter 13 wasn’t affordable since we relied on the mortgage interest deduction on the house-to-be-surrendered to avoid monthly disposable income. It seemed to be a win or lose confrontation.
When up popped the issue of some stock options that we thought the trustee had abandoned. The trustee reversed himself and said, “no, those are mine”.
I ended up saying halleluiah. Because with the prospect of an asset in a case heretofore a no asset case, the UST withdrew the motion to dismiss.
The loss of the stock options was far less expensive than funding a Chapter 13 plan without the home mortgage payment deduction. We had a perverse sort of settlement of the abuse motion.
Is there a takeaway?
The outcome had lead me to wonder whether leaving some money on the table, some asset for creditors, in a case where the 707 issues lurk might not be a cheaper way out of such disputes. Make a preferential payment. Leave unexempted cash. Put the UST to a decision about whether they want to dismiss an asset case in a fight over income.
What do you think?
Image courtesy of Graham Binns
If you are in the Northern District of California, consider joining me for a 2 hour exploration of community property issues in bankruptcy cases July 12 5-7 at the Computer History Museum in Mt. View. We’ll look at all the strange and wonderful things that happen when married people, or formerly married people, file bankruptcy. Sign up info.