About Me
“ Craig D. Robins, Esq., has been a practicing Long Island bankruptcy attorney for over twenty-four years ”
Written by Craig D. Robins, Esq.Are Debtors Honest In Their Bankruptcy Petitions? The UST Wants to Know
The United States Trustee Program began auditing consumer bankruptcy cases in October 2006 to further ensure that debtors were properly disclosing accurate information in their bankruptcy petitions pursuant to BAPCPA — supposedly to promote the integrity and efficiency of the bankruptcy system.
I discussed the auditing concept in great detail in my post Random Audits of Consumer Debtors to Begin in October .
The statute that calls for audits provides for the establishment of procedures “to determine the accuracy, veracity, and completeness of petitions, schedules, and other information that the debtor is required to provide in individual bankruptcy cases.”
The same statute also requires the Attorney General to issue a yearly report of the audit results.
2010 U.S. Trustee Bankruptcy Audit Results
There were 2,675 audits in 2010. Out of these, there were 1,395 random audits and 1,280 targeted audits. I discussed the different types of audits in my prior post: Random Audits of Consumer Debtors to Begin in October .
The law provides for conducting one random audit per 1,000 filed bankruptcy cases. However, the U.S. Trustee program ran out of funding. Since 2008 and continuing through 2010, there was only enough money to conduct one random audit per 250 filed cases.
Of all of the 2,675 audits, there were 584 cases in which there was a material misstatement, representing 23% of the cases.
Targeted audits had a higher percentage of misstatements — 29%, compared to random audits — 17%
These figures have remained consistent for the past three years.
The overall average for the Eastern District of New York was 21%, meaning that Long Islanders are slightly more honest or accurate than the rest of the country, or that Long Island bankruptcy attorneys do a better job in preparing their petitions. I’d like to think that it’s the latter.
Our Experience with One of the Random Audits
Of the 1,395 random audits conducted last year, one of them was performed on one of my clients.
We cooperated with the auditors (an accounting firm) by providing a number of documents from a rather lengthy list.
Several weeks later we received a copy of a letter that they sent to the U.S. Trustee indicating that there were no material misstatements in that case. Nevertheless, one of the trial attorneys in the local U.S.T. office requested an explanation of something, which we quickly provided, and the case was then closed.
