US Trustee on Debtor Audits

Official U.S. Trustee Program Information Concerning Debtor Audits

“The United States Trustee Program is authorized to audit chapter 7 and chapter 13 bankruptcy cases filed by individuals. See Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, § 603, 119 Stat. 23 (2005) and 28 U.S.C. § 586(f).” This content is the official information sheet provided to debtors verbatim.

“A bankruptcy case may be randomly selected for an audit. In addition, a case may be selected for an exception audit if the debtor’s income or expenditures deviate from the statistical norms for the district in which the case was filed.”

“The audit involves the verification of the income, expenses, and assets reported by a debtor in the bankruptcy schedules and statements. A debtor is required to timely provide additional information and records and to cooperate with the audit firm. The debtor has no additional cost for an audit, except for the cost of making copies of required documents for the audit. The information that a debtor provides in connection with a case is subject to examination by the Attorney General or his designee. “

“Additional disclosures of the information may be to contractors engaged to perform debtor audits, to a bankruptcy trustee when the information is needed to perform the trustee’s duties, to the appropriate federal, state, local, regulatory, tribal, or foreign law enforcement agency when the information indicates a violation or potential violation of law, or to a credit counseling or debtor education provider when the information is necessary to enable the provider to perform its duties. Other disclosures may be made for routine purposes.”

“For a discussion of the types of routine disclosures that may be made, you may consult the United States Trustee Program’s systems of records notice, UST-001, “Bankruptcy Case Files and Associated Records.” See 71 Fed. Reg. 59,818 et seq. (Oct. 11, 2006). A copy of the notice may be obtained, at the following link: regulations/index.htm. “

“The audit firm will file a report containing the results of the audit. 28 U.S.C. § 586(f)(2)(A). If the audit firm finds material misstatements of income, expenses, or assets, the clerk of the bankruptcy court will notify the debtor’s creditors. 28 U.S.C. § 586(f)(2)(A). The report is not a legal determination, and the legal effect of the auditor’s finding of a material misstatement is a question for the court.”

“By statute, debtors are required to cooperate with the audit firm. See 11 U.S.C. § 521 (a)(3) and (4). Failure to cooperate with the audit firm, or failure to reasonably explain to the bankruptcy court any material misstatements contained in the audit firm’s report, may result in the dismissal of the case or the denial or revocation of discharge, and, possibly, referral of the matter to the United States Attorney for criminal investigation. 11 U.S.C. § 727 and 28 U.S.C. § 586(f)(2)(B).”

Who are the Chapter 7 Trustees in Kansas?

Chapter 7 Trustees

The chapter 7 interim trustees for cases filed in the the U.S. Bankruptcy Court for the District of Kansas are charged with liquidating non-exempt property and recovering transfers improperly made by you prior to the filing of your petition. They turn these assets into cash and pay the cash to your creditors. They are paid a commission on the monies collected. Most chapter 7 cases are “no-asset” cases and are closed when the trustee reports to the Court that there no are assets to distribute to creditors.

Clients – Do NOT contact trustees!  Call your attorney!

Chapter 7 Trustees in the Topeka Division

  • Darcy D. Williamson, Attorney at Law, 510 SW 10th, Topeka, KS 66612, Phone: (785) 233-9908, Fax: (785) 233-2613

Chapter 7 Trustees in the Kansas City, KS, Division

  • Carl R. Clark, Lentz Clark Denies PA, P.O. Box 12167, Overland Park, KS 66282-2167, Phone: (913) 648-0600, Fax: (913) 648-0664
  • Eric C. Rajala, 11900 College Boulevard, Suite 341, Overland Park, KS 66210, Phone: (913) 339-9806, Fax: (913) 339-6695

Chapter 7 Trustees in the Wichita Division

  • Steven L. Speth of Speth of Speth & King, 300 W Douglas St., Ste. 230, Wichita, KS 67202, Phone: (316) 264-3333, Fax: (316) 264-1305.
  • Carl B. Davis, Davis & Jack, L.L.C.,  2121 W. Maple, Wichita, KS 67213, (316) 945-8251.

Reaffirmation Requires More than Checking a Box

Much has been written on this blog about reaffirmation. BLN author Jed Berliner makes a compelling argument that reaffirmation in Chapter 7 is a bad idea – why should you assume personal liability for a debt and forgo up to 8 years of bankruptcy protection on the hope that time Full Article…
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341 Meeting: What Will They Ask Me?

Questions the Trustee is required to ask you at your bankruptcy hearing called a 341(a) meeting of creditors:

1. State your name and current address for the record.

2. Please provide your picture ID and Social Security number card for review.

3. Did you sign the petition, schedules, statements, and related documents and is the signature your own? Did you read the petition, schedules, statements, and related documents before you signed them?

4. Are you personally familiar with the information contained in the petition, schedules, statements and related documents? To the best of your knowledge, is the information contained in the petition, schedules, statements, and related documents true and correct? Are there any errors or omissions to bring to my attention at this time?

Watch a short video of a typical 341 hearing.

5. Are all of your assets identified on the schedules? Have you listed all of your creditors on the schedules?

6. Have you previously filed bankruptcy? (provide trustee with case number and the discharge information to determine discharge eligibility in this case)

7. What is the address of your current employer?

8. Is the copy of the tax return you provided a true copy of the most recent tax return you filed?

9. Do you have a domestic support obligation? To whom? Please provide the claimant’s address and telephone number, but do not state it on the record. Are you current on your post-petition domestic support obligations?

10. Have you filed all required tax returns for the past four years?


1. Do you own or have any interest whatsoever in any real estate? If owned: When did you purchase the property? How much did the property cost? What are the mortgages encumbering it? What do you estimate the present value ofthe property to be? Is that the whole value or your share? How did you arrive at that value? If renting: Have you ever owned the property in which you live and/or is its owner in any way related to you?

2. Have you made any transfers of any property or given any property away within the last one year period (or such longer period as applicable under state law)? If yes: What did you transfer? To whom was it transferred? What did you receive in exchange? What did you do with the funds?

3. Does anyone hold property belonging to you? If yes: Who holds the property and what is it? What is its value?

4. Do you have a claim against anyone or any business? If there are large medical debts, are the medical bills from injury? Are you the plaintiff in any lawsuit? What is the status of each case and who is representing you?

5. Are you entitled to life insurance proceeds or an inheritance as a result of someone’s death? If yes: PIease explain the detaiI s. If you become a beneficiary of any one’s estate within six months of the date your bankruptcy petition was filed, the trustee must be advised within ten days through your counsel of the nature and extent of the property you will receive. FRBP 1007(h)

6. Does anyone owe you money? If yes: Is the money collectible? Why haven’t you collected it? Who owes the money and where are they?

7. Have you made any large payments, over $600, to anyone in the past year?

8. Were federal income tax returns filed on a timely basis? When was the last return filed? Do you have copies ofthe federal income tax returns? At the time of the filing of your petition, were you entitled to a tax refund from the federal or state government ? If yes: Inquire as to amounts.

9. Do you have a bank account, either checking or savings? If yes: In what banks and what were the balances as of the date you filed your petition?

10. When you filed your petition, did you have:

a. any cash on hand?
b. any U.S. savings bonds?
c. any other stocks or bonds?
d. any certificates of deposit?
e. a safe deposit box in your name or in anyone else’s name?

11. Do you own an automobile? If yes: What is the year, make, and value? Do you owe any money on it? Is it insured?

12. Are you the owner of any cash value life insurance policies? If yes: State the name ofthe company, face amount of the policy, cash surrender value, if any, and the beneficiaries.

13. Do you have any winning lottery tickets?

14. Do you anticipate that you might realize any property, cash or otherwise, as a result of a divorce or separation proceeding?

15. Have you been engaged in any business during the last six years? If yes: Where and when? What happened to the assets of the business?

Source: Executive Office of U.S. Trustee, Handbook for Standing Trustees.

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Reconversion Fails, No Discharge Bankruptcy Dismissed

In re Fry, Case No. 04-16887
October 2008 Judge Nugent

Debtor converted from 13 to 7 and then learned she was not eligible for a 7 and attempted to converted back to 13. Case dismissed as an “end run” around 7 discharge.

Digest by:  Jan Hamilton, Trustee

Tax Refunds to Attorney Fees then Bankruptcy Trustee

In re: Sydmark, Case No. 06-41218
In re: Black-Watkins, Case No. 05-42439
June, 2008, Judge Karlin

Lamie v. US and Redmond v. Lentz, Hodes and Wagers redux. Assignment of a tax refund does not divest the estate of an interest in them, even though UCC1 was filed. In a Chapter 7 case, refunds, after subtraction of a flat fee, must be turned over to Trustee.

Debtor May Be Converted to 7 with No Discharge

In re Rogers, Case No. 08-21487
January 2009, Judge Somers

In a case in which assets may be liquidated, a 13 may be converted to a 7 even though debtors may not be eligible for a 7 discharge.

Digest by:  Jan Hamilton, Trustee

What is Bankruptcy Conversion?

Conversion: Cases under the Code may be converted from one chapter to another chapter; for example, a Chapter 7 case may be converted to a case under Chapter 13 if the debtor is eligible for Chapter 13. Even though the chapter of the Code which governs it changes, it remains the same case as originally filed.

What Is Chapter 7 Bankruptcy?

Chapter 7 Bankruptcy: The most common form of bankruptcy, a Chapter 7 case is a liquidation proceeding, available to individuals, married couples, partnerships and corporations. More in Bankruptcy Basics.

Video: What Happens at My Bankruptcy Hearing?

Watch what happens at a bankruptcy meeeting of creditors, also known as your 341 hearing.

What will they ask me at my bankruptcy meeting?

Video: How Do I File for Bankruptcy?

How to Get Started Filing for Bankruptcy

How to Get Your Bankruptcy Certificate from a Credit Counselor

Documents to Gather for Your Bankruptcy Attorney

Video: What are the Types of Bankruptcy?

Types of Bankruptcy

There are three main types of bankruptcy cases for individuals, the most common of which are chapter 7 and chapter 13.

Running Time: (3:55)

What Will the Trustee Ask Me at My Bankruptcy Hearing?

Here are the standard questions that the bankruptcy trustee asks debtors at chapter 7 and chapter 13 bankruptcy hearings also called a meeting of creditors or a 341 hearing.  The bankruptcy trustee is required to ask all debtors the first group of questions.  The second group of questions are suggestions at the trustee’s discretion.  These questions are printed in the trustee handbooks by the Executive Office of the U.S. Trustee.


1.         State your name and current address for the record.

2.         Please provide your picture ID and Social Security number card for review. [Read more…]

What Would Jesus Say About Debts and Bankruptcy?

The Old Testament teaches the legal and moral obligation to pay just debts must be balanced with compassion and a call for cancellation of debts.  Jesus promoted debt forgiveness and preached the importance of placing love and compassion above greed and wealth.

In Luke 6:34-35, Jesus said: “And if you lend to those from whom you hope to receive, what credit is that to you? Even sinners lend to sinners, to receive as much again. But love your enemies and, do good, and lend, expecting nothing in return, and your reward will be great, and you will be sons of the Most High; for he is kind to the ungrateful and the selfish.”

“The consistent teaching of both the Old and New Testaments is that compassion, mercy and justice are to override purely economic concerns, such as loans. Religious people are to be gracious to all, even debtors,” according to the essay, Forgive Us Our Debts.

Bible verses on debt and bankruptcy

Should I Reaffirm Department Store Credit Cards?

Some department store credit cards may be secured.  The things you buy with the credit card may be collateral.  The store might tell you that they will repossess what you bought, such as a TV, washer, or sofa, if you do not reaffirm the debt.  Most of the time, stores will not repossess used merchandise.  So, after a bankruptcy, it is much less likely that a department store would repossess “collateral” than a car lender.

However, repossession is possible.  You have to decide how important the item is to you or your family.  If you can replace it cheaply or live without it, then you should not reaffirm.  You can still shop at the store by paying cash, and the store may offer you a new credit card even if you don’t reaffirm. (Just make sure that your old balance is not added into the new account.)

For Example

Some offers to reaffirm may seem attractive at first.  Let’s say a department store lets you keep your credit card if you reaffirm $1000 out of the $2000 you owed before bankruptcy.  They say it will cost you only $25 per month and they will also give you a $500 line of credit for new purchases.  What they might not tell you is that they will give you a new credit card in a few months even if you do not reaffirm.  More importantly, though, you should understand that you are agreeing to repay $1000 plus interest that the law says you can have legally canceled.  That is a big price to pay for $500 in new credit.

Another option for keeping property with a purchase money security interest is redeeming it from the creditor for a lump sum cash payment.

Source: Your Legal Rights During and After Bankruptcy:  Making the Most of Your Bankruptcy Discharge Pamphlet, National Consumer Law Center, Boston, MA,

Should I Reaffirm Credit Cards?

It is almost never a good idea to reaffirm a credit card.  Reaffirming means you will pay bills that your bankruptcy would normally wipe out.  That can be a very high price to pay for the convenience of a credit card.  Try paying cash.  Then in a few years, you can probably get a new credit card, that won’t come with a large unpaid balance!

If you do reaffirm, try to get something in return, like a lower balance, no interest on the balance, or a reasonable interest rate on any new credit.  Don’t be stuck paying 18/-/21% or higher!

Source: Your Legal Rights During and After Bankruptcy:  Making the Most of Your Bankruptcy Discharge Pamphlet, National Consumer Law Center, Boston, MA,

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