The United States Trustee Program (USTP) has resumed audits of individual chapter 7 and chapter 13 bankruptcy cases under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 on March 13 ,2023.
What does this mean if your case is selected?
The USTP contracts with independent firms, utilizing certified public accountants and independent licensed public accounts, to perform audits of individual chapter 7 and chapter 13 cases randomly selected by the USTP. The purpose of the audit is to determine the accuracy, veracity, and completeness of petitions, schedules, and other information required to be provided by the debtor under sections 521
and 1322 of title 11. The audits are designed to provide baseline data to gauge the magnitude of fraud, abuse, and error in the bankruptcy system; to assist the USTP in identifying cases of fraud, abuse, and error; and to enhance deterrence.
What are your odds of your bankruptcy case being audited?
The USTP randomly designates for audit 1 out of every 250 consumer bankruptcy cases per federal judicial district and cases for exception audit in which the income or expenditures of a debtor deviate from the statistical norm of the district where the case was filed. An audit consists of a comparison between selected items on a debtor’s originally filed bankruptcy papers and documents produced by the debtor at the request of the audit firm. The audit firms also conduct public record searches to look for unreported assets and to verify the market value of assets.
If a material misstatement is found that the debtor fails to satisfactorily explain, the United States Trustee may pursue a variety of actions depending upon the circumstances of the case. This can include opposing a discharge of debt, or even a criminal referral to the U.S. Attorney’s office.
Remember, similar to real estate where location, location, location means everything – in bankruptcy it’s disclose, disclose, disclose.