When Congress revised the nation’s bankruptcy laws in 2005, there were concerns it could become more difficult to file for bankruptcy. Fortunately, that has not been the case for most people interested in fling.
The 2005 law did add a few additional hoops to jump through. Overall, though, bankruptcy remains a very useful strategy in for many people seeking meaningful debt relief. In the San Antonio area and across the country, the number of bankruptcy filings continues to reflect this fact.
One of the additional hoops added in 2005 concerned audits of consumer bankruptcy filings. The law authorizes bankruptcy trustees to randomly select for auditing one personal bankruptcy case out of every 250 in each respective federal district. The legislation also allowed trustees to initiate audits in cases involving highly unusual income or expenditures.
The audits were to be performed not by court officials, but independent examiners. They were supposed to look for fraud, such as debtors trying to conceal assets from the court. Documents to be examined were to include tax returns, bank statements, and paychecks, as well as other information.
So the audit program went into effect, to mixed reviews. Financial services companies generally considered it to be an important check on bankruptcy fraud. But bankruptcy attorneys pointed out that the audits often dragged out the bankruptcy process. And it was not always clear what the definition of “material misstatement” used in the audits referred to.
Last month, the audit game abruptly changed. The U.S. Trustee Program, which administers the audits, announced that is suspending them indefinitely. The program is run by the U.S. Justice Department, which like all federal agencies is under intense financial pressure from across-the-board budget cuts.
Source: “Bankruptcy Watchdogs Suspend Debtor Audits,” The Wall Street Journal, Jacqueline Patank, 4-1-13
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