Why is the US Trustee auditing my bankruptcy case?
First thing is first, talk to your attorney
If the US Trustee is auditing your case, you should consult with your bankruptcy attorney. If you do not have an attorney, this might be the time to do so. The US trustee audits a case if they believe their is potential abuse or fraud of the bankruptcy process. Certain things on your bankruptcy petition might have caused a red flag requiring the trustee to investigate further.
Some red flags can be multiple bankruptcy filings, transfers of assets, or incorrect income calculations etc. In some cases, the US trustee might audit a case because of the type of legal firm, paralegal, petition preparer or attorney you used. For example, if an attorney is new, or they see the attorneys name for the first time, they might want to audit the case to make sure the attorney is doing everything the right way. Or if an attorney has years of experience, they might audit a case to keep the attorney on their toes. Sometimes the US Trustee will audit a case to make sure non attorney petition preparers are not taking advantage of Debtors.
Provide the documents requested by the US Trustee
In most situations where the US Trustee decides to audit a case, they will start by requesting a number of documents. These normally include bank statements, pay statements, tax return etc. Your attorney should already have most of the documents already.
If the documents match what is on the petition and there are no other barriers to receiving a discharge, the US Trustee will most likely walk away from the case and say thank you for your time.
On the other hand, if the US trustee is continuing to request documents, there must be something sparking the US Trustee’s interest. Do your bank deposits match your income reported on your tax returns? Were there purchases of property (real and/or personal) that is not listed as an asset on your petition? Do you own a business? If so, are the business assets listed? Do your profit and loss statements match the income on your petition? Do they match your taxes? Are there cash deposits into your bank accounts? Is that money accounted for?
If you believe there are no discrepancies than contact the the US trustee and ask them specifically what they are looking for. They might give you an answer. If they don’t and you still believe the trustee is being abusive than you should discuss your objections with your attorney.
Is it abusive?
However, if the trustee is simply asking for tax returns, pay stubs, mortgage statements, bank statements etc… that would not consider that being abusive. The US trustee doesn’t really have a stake in your bankruptcy except to determine whether you committed bankruptcy abuse. This includes abusing credit cards before filing the bankruptcy, hiding assets, hiding income, and your ability to repay your debt in a chapter 13 or outside of bankruptcy.
Last thing is first
Again, the importance of speaking to your attorney in US Trustee audit cases is the best thing you can do. Make sure you clear the air with your attorney to determine the best option for your situation. If there is something that you didn’t tell your attorney, now is the time to do so. Bankruptcy fraud is serious and criminal charges may be forthcoming.