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).”

Bankruptcy Trustees in Kansas

Chapter 13 Bankruptcy Trustee – Topeka

Chapter 13 Bankruptcy Trustee – Kansas City, Kansas

Chapter 13 Bankruptcy Trustee – Wichita

Chapter 7 Bankruptcy Trustees

Chapter 12 Bankruptcy Trustee

U.S. Trustee Region 20 – Wichita

Executive Office of the United States Trustee

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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.

Chapter 13 Bankruptcy Payments

Chapter 13 bankruptcy debtors are responsible for making their plan payments to the trustee.   No excuses.

This is true even if your payments are supposed to be deducted from your paycheck.  If no deduction is taken out of your check or if your employer does not remit the money to the trustee, you are still responsible for the payment.

Watch your pay stubs to make sure the payments are being deducted.  If not, make the payment yourself and call your attorney to troubleshoot.  Your case will be dismissed if payments are not made and you will lose the benefits of chapter 13 bankruptcy.

You can check whether the trustee has received payments by setting up an account with the National Data Center.

Neither Topeka nor Kansas City, Kansas, chapter 13 bankruptcy trustees accept cash nor any kind of electronic bank transfer (ACH transactions).  You can set up bill payer service at your bank and arrange for your bank to send the trustee a check if you don’t have employer pay. The Topeka trustee has an electronic payment service provided by a third party.

What are Bankruptcy Avoidance Powers?

Avoidance powers: Rights given to the bankruptcy trustee (or the debtor in possession in a Chapter 11) to recover certain transfers of property such as preferences or fraudulent transfers or to void liens created before the commencement of a bankruptcy case. More on preferences.

My Chapter 13 Bankruptcy Is Filed, Now What?

Answers to your basic chapter 13 bankruptcy questions by Jan Hamilton, Standing Chapter 13 Bankruptcy Trustee in Topeka, Kansas:

Please Read This Entire Letter. It contains information needed to complete your Chapter 13 Plan and answers certain questions you may have. If you have a question that is not addressed here, you should contact your attorney. The Trustee’s office does not give legal advice. You may also access your case information by visiting the National Data Center at their website at

What Do I Need to Do Now?

In accordance with LBR 4001.2, at least seven days before your First Meeting of Creditors, you must provide the Trustee with a copy of the most recently filed state and federal income tax returns. [Read more…]

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?

Interpreters for Bankruptcy 341 Hearings

The United States Trustee’s office is now providing free interpreters by telephone at bankruptcy meetings of creditors (341 hearings) for limited English proficient debtors.

For more information, go to web site for the Executive Office of the U.S. Trustee:

Persons wishing to use the interpreter service should contact the case trustee in advance of the meeting to make arrangements.

Do I Have to Reaffirm Car Loans, Home Mortgages?

If you are behind on a car loan or a home mortgage and you can afford to catch up, you can reaffirm and possibly keep your car or home.  If the lender agrees to give you the time you need to get caught up on a default, this may be a good reason to reaffirm.  But if you were having trouble staying current with your payments before bankruptcy and your situation has not improved, reaffirmation may be a mistake.  The collateral is likely to be repossessed or foreclosed anyway after bankruptcy, because your obligation to make payments continues.  If you have reaffirmed, you could then be required to pay the difference between what the collateral is sold for and what you owe.

If you are up to date on your loan, you may not need to reaffirm to keep your car or home.  Some lenders will let you keep your property without signing a reaffirmation as long as you continue to make your payments.  Sometimes lenders will do so if they think the bankruptcy court will not approve the reaffirmation agreement.

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

Debtors Arrested for Ignoring Bankruptcy Court Orders, Spending Tax Refunds

Spending a tax refund that belongs to a bankruptcy estate or ignoring court orders may get you arrested by the U.S. Marshals Service and brought before the bankruptcy judge for contempt of court.

The moral of the story is don’t spend your tax refunds without talking to your bankruptcy lawyer first to make sure they are your refunds to spend.  Spending a refund that belongs to the bankruptcy estate can get you in a lot of hot water including denial of your discharge, judgment for the money and arrest if you ignore court orders to appear.

If you have made a mistake and spent refunds inappropriately, don’t ignore court orders.  Let you lawyer know so a plan can be made to make amends.  Getting arrested does not have to happen to you.

Judge Janice Miller Karlin of the U.S. Bankruptcy Court for the District of Kansas, Topeka Division, issued a new policy regarding bench warrants on January 26, 2009:

To assure the sanctity of this Court’s orders for turnover, appearance, etc., the Court will occasionally issue a Bench Warrant [Read more…]

Strict Deadlines Apply to Discharge Challenges

Section 704(b) requires that the U.S. Trustee file a statement of abuse within 10 days after the date of the first meeting of creditors and a motion to dismiss for abuse within 30 days after filing the statement. Judge Julie A. Robinson of the Kansas District Court on appeal affirmed the Bankruptcy Court’s ruling that the U.S. Trustee cannot manipulate and extend these deadlines by continuing the meeting of creditors to later date–the first meeting is the first meeting. When the U.S. Trustee filed its statement of abuse after a continued meeting of creditors, weeks after the “first” meeting, the Courts agreed that the statement and subsequent motion to dismiss were untimely, and Debtor’s chapter 7 discharge was allowed to stand.

In re Close, Case No. 07-2076-JAR, Bankruptcy case No. 06-20195-7, Turner UST v Close.

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