United States Trustee Initiative

Bankruptcy Article #9

In the year 2002, the United States Trustee's office for the District of Maine began evaluating individuals filing Chapter 7 petitions to determine whether they might be better placed in some other bankruptcy chapter. Individuals with higher incomes seem to be the targets. If a debtor is has higher income, and capable of making some payment toward his or her debts, the U.S. Trustee's office may file a motion to dismiss the Chapter 7 case. Debtors at that point have the option of either disputing the U.S. Trustee's position (which will result in extensive litigation and additional counsel fees for the debtor) or converting his or her case to a Chapter 13. If the debtor converts the case to a Chapter 13, the U.S. Trustee's office will not pursue its inquiry of the debtor's finances since the Chapter 13 Trustee's office is capable of performing that function.

It is unclear what constitutes "higher income". This author has seen the U.S. Trustee's office explore a debtor's budget where an individual debtor's income exceeded $50,000.00 per year and a couple's income exceeded $60,000.00 per year. Although the U.S. Trustee may not have any particular bench mark in mind for the evaluation of a debtor's income and expenses, higher income debtors should beware that their budget may be closely scrutinized through this initiative and they may end up in a bankruptcy chapter that they did not expect.