My colleague, Susan Gantt, works as a contract attorney who handles Meeting of Creditor hearings for several Atlanta area bankruptcy lawyers. Because she attends 341 hearings all day long and associates with several law firms, she can offer all of us a valuable perspective about the practical issues that arise in Chapter 13 cases.
I asked Susan to identify the most common trustee objections. In previous posts I discusssed to very common objections:
– failure to have a payroll deduction in place for Chapter 13 funding; and
– failure to provide proof of post-petition mortgage payments
3) Proof of supplemental income. In this post, I will discuss a third common objection – failure to provide proof of financial support from friends or family.
The premise behind a Chapter 13 case provides that a debtor must submit all of his “disposable income” to the Chapter 13 trustee for distribution to creditors. At the same time, there are mathematical constraints to Chapter 13 – you have to have enough money to pay debts such as car notes, mortgage arrearage and past due taxes, all within a maximum five year plan.
For example, if you owe $25,000 on a car note and $15,000 in taxes, but you only show $100 a month left over after paying household expenses, your plan cannot provide for a 60 month payout of your car and tax debt.
Sometimes, clients come to me for the purpose of saving a house or a car but because of limited income we run into this cash flow dilemma. Often the solution to this problem can be found by including in the income schedules financial support from a parent, sibling, roommate or friend.
It has been my experience that Chapter 13 trustees don’t necessarily have a problem with a family/friend contribution to income but they will want to see proof. An affidavit, or sworn statement, from the family member or friend can serve as acceptable proof of income.
Susan notes that many debtors and their attorneys fail to bring this affidavit of support to the 341 hearing. Even worse, debtors and their counsel often forget that they had used support from family or friend as a source of income. I have witnessed several 341 hearings in which the truste asked if the debtor was still receiving financial support and the debtor answered “no” and did not seem to recall ever getting such support!
So, if you and your attorney include support from family or friend as an income item, make sure to ask that family member or friend to sign an affidavit setting out the details abot that support. Your lawyer should be able to provide you with an affidavit form.