There are two types of audits regarding bankruptcy: an abuse bankruptcy audit and a random bankruptcy audit. If the trustee sees something in the bankruptcy case that makes him question the validity of the bankruptcy, then it can be viewed as abuse. For example if you have income or expenses that are considerably above statistical norms, an abuse audit may be performed. The second type of audit is a random audit. In the event that you are told that there will be an audit performed on your bankruptcy case, do not fret. It is probably something that has been overlooked that prompted the trustee assigned to your case to submit your file to the U.S. Trustees Office.
What Happens in a Chapter 7 Bankruptcy Audit?
If your Chapter 7 bankruptcy case is up for an audit, then you will need to submit the following information to the U.S. Trustees Office:
- Pay-stubs from your employer for the past six months
- Income tax returns for the past two years
- Bank account statements for the past six months with an explanation of every transaction that transpired
- Child support order, divorce decree, property settlements for the past three years if applicable
Purpose of the Audit
So, the audit is performed not only to verify accuracies but also to find any material misstatements in the bankruptcy file. A material misstatement is any inaccuracy that may compromise the integrity and the reliability of the bankruptcy paperwork filed. While it is still unclear what these audits seek to find (aside from material misstatements) it is highly advisable that you simply cooperate with the audit should you be faced with one. In a Chapter 7 bankruptcy audit, it is important for you to have all of your supportive documentation handy. During bankruptcy, preparation is absolutely the best possible thing that you can do.
After the Audit
Once the audit is complete, you should ask your lawyer a plethora of questions. Namely, you should ask what the bankruptcy audit found, and what happens if a material misstatement is found. Usually after an audit is performed, the U.S. Trustee does nothing unless a criminal act like fraud is suspected.
Getting Help
In any event, be sure to have a bankruptcy attorney on hand. Without a bankruptcy attorney it may be quite a challenge getting through the bankruptcy process. In the event that you are filing a Chapter 7 bankruptcy, a bankruptcy attorney will help you ensure that the process surrounding the bankruptcy is smooth, worry-free and legal.
