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Craig D. Robins, Esq. New York Bankruptcy Attorney, Longisland bankruptcy attorney

“ Craig D. Robins, Esq., has been a practicing Long Island bankruptcy attorney for over twenty-four years ”

Craig D. Robins, Esq.

Nine Tips to Protect Your Clients From the U.S. Trustee Initiative Program

Posted on Wednesday (March 3, 2004) at 11:00 am to Bankruptcy Practice
Nassau Lawyer

Tip #4: Pay Extra Attention to the Budget Schedules. The major factor in most substantial abuse cases is whether the debtor has the ability to repay a significant portion of his debts over a three year period. A debtor’s ability to repay is easily gleaned from an analysis of the budget schedules in the petition. Make sure that all payroll deductions are reasonable and necessary. Consider having the client stop or reduce any large pension or pension loan deductions. Pay careful attention to the reasonableness of expenses. Some examples of expenses that attract attention include expensive cars, vacation homes, boats, and recreational expenses. Watch out for disposable income (the difference between net income and reasonable expenses), which is how lesser-experienced practitioners often get their clients in trouble.

Although it is important to assist your client with the preparation of all schedules, you should avoid being put in the defensive position that you assisted in fudging the figures or coaching the client to hide disposable income. If a client has too much disposable income, then Chapter 13 should be considered rather than Chapter 7.

Tip #5: Prepare and Assemble Documents in Advance. If your client has a large amount of income or a large amount of debts, consider obtaining certain documents from your client before you file the petition, as the U.S. Trustee may likely ask for copies of them. They include several years of recent bank account statements, tax returns, credit card statements, pay stubs, utility bills, and in general, proof of other expenses.

Tip #6: Develop a Strategy in Advance. If you feel that 707(b) issues exist in your case, or if you feel that there is any other reason why the U.S. Trustee may want to scrutinize the case, develop a strategy and plan for defending the debtor’s good faith now, rather than wait until the issue is raised by the Chapter 7 trustee or U.S. Trustee. In other words, prepare the debtor’s explanation in advance.

Tip #7: Communicate with the Chapter 7 Trustee. One of the obligations of a Chapter 7 trustee is to make a determination as to whether the case is filed in bad faith or whether the granting of bankruptcy relief would be considered a “substantial abuse” of the bankruptcy laws under Code section 707(b). If a Chapter 7 trustee feels that such an issue may be present, then he makes a “referral” to the U.S. Trustee. It is not up to an individual Chapter 7 panel trustee to seek dismissal of a case; only the U.S. Trustee can do that. Therefore, if you feel that a case may contain 707(b) issues, you should communicate with the trustee to avoid a referral. Consider sending a letter to the trustee prior to the meeting of creditors to explain why there may be a large amount of debt, or to point out why a debtor with a relatively high income is nevertheless filing in good faith.

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Craig D. Robins, Esq. is a Long Island bankruptcy lawyer, who is focused primarily on helping individuals and families, find solutions to their debt problems. Read more »


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Craig D. Robins, Esq.
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