US Trustee Review Questions

[BKHELP138]

It wont let me post it. I would assume because it is from a Bk network group.

[tobee43]

http://www.*************************...udit-risk-low/

ok....are you seeing a url address because over here nothing.....i clicked and got the opps page again??? and I REALLY want to see it...LOL!!!!

[ValleYum]

ahhhhhhhh.....i couldn't get there...it went to the opppppp's page??

Tobee - I think it may be one of the words that the Admins have ***'d out. On a forum I moderate, we have some words and websites like that.

So, I just googled "bankruptcy audit risk low" and found the article.

Some interesting "snips":

One in 583 cases out of 1.4 million bankruptcies filed was chosen for audit in fiscal year 2009. Compare that with a little more than one in 100 tax returns audited by the IRS.

About half of the bankruptcy audits were randomly-selected audits. The others were exception or targeted audits of cases with income or expenses above statistical norms. The selection criteria is kept secret by the U.S. Trustee.

If your case is selected for audit, you should know within 10 days after your petition is filed. Private audit firms are hired to compare the paperwork, called schedules and statements, with tax returns, bank statements, pay stubs and divorce documents. They run the debtor’s name through two computerized databases to search for unreported assets. If a “material misstatement” is found, the auditor offers the debtor the chance to explain or give more information.

The Bankruptcy Abuse Prevention and Consumer Prevention Act of 2005 (BAPCPA), authorized audits starting October 2006. The number of audits dropped sharply after 2007 when Congress cut funding. One in 614 bankruptcy cases were audited in fiscal year 2008 with 21% audit reports identifying “material misstatements”.

The last one makes me giggle a little - funding cuts? Join the club!! haha

Very interesting.

[BKHELP138]

Yeah that is it. you are 5 times more likely to get an IRS audit than a UST audit and mostly due to income and expenses. Loosing $1,800 a month on a business while filing BK would throw red,purple and green flags. Ditch the business cause it sounds like your just trying to lower your income on the means test.

[tobee43]

Tobee - I think it may be one of the words that the Admins have ***'d out. On a forum I moderate, we have some words and websites like that.

So, I just googled "bankruptcy audit risk low" and found the article.

Some interesting "snips":The last one makes me giggle a little - funding cuts? Join the club!! haha

Very interesting.

GREAT stuff!!! yeah...funding cuts ....which means there actually should be NO audits being done now!!!

[tobee43]

Yeah that is it. you are 5 times more likely to get an IRS audit than a UST audit and mostly due to income and expenses. Loosing $1,800 a month on a business while filing BK would throw red,purple and green flags. Ditch the business cause it sounds like your just trying to lower your income on the means test.

GOT IT BKHELP!!! thanks...i didn't see anything "naughty"....i really wonder why it doesn't link up???...i'm trying it just for tech kicks.....i see it...now let's see if it goes thru...not that my listing it should make a difference.


http://www.*************************...udit-risk-low/



edit....weird....nope...it does not come through

[ValleYum]

Yeah that is it. you are 5 times more likely to get an IRS audit than a UST audit and mostly due to income and expenses. Loosing $1,800 a month on a business while filing BK would throw red,purple and green flags. Ditch the business cause it sounds like your just trying to lower your income on the means test.

We have been the lucky 1 in 100 for an IRS 'Examination' <--their audit info booklet calls it that.

Ours was over hubby's alimony. We were claiming it as alimony paid, whilst his ex never claimed it on her return. All we did was prove the payments were made and met all of the IRS' criteria for being alimony. We quoted their own words back to them (and annotated it with their own publication number) and won. Yippee!

I sure hope this doesn't line us up for an UST audit as well. We were over the median but passed means test on expenses. LOL it would be my luck these days!!

[debee]

The UST's website gives the random audit figure as 1:1000. So even less likely than reported in the ***** article.

[biotechsolution]

I have a couple questions. If this BK was do to the failing business then you shouldn't be worrying about the means test and a chapter 13. This debts should be business debts so you can skip everything else.
If these are personal debts then you are going to have a hard time pulling off the chapter 7. The other poster was definitely right about showing a loss on your means tests for your self-employment.
It would be essentially the same has keeping a 2nd home that isn't rented and showing a 2K mortgage payment has an additional expense. I can't see that flying.
You need a very good attorney. Or have a feeling this attorney knew you were going to be in a Chapter 13 the whole time but filed the 7 first.
How far over the mean are you? Without counting the self-employment loss.

[tcreegan]

Hi cw,

You didn't get audited b/c of the debt, the UST audits when "the income or expenses deviate from the statistical norm for the district in which the case is filed"

So either the income or expenses got you a special audience with the UST Now that you are there, the UST has 2 main objectives:

1) was there any fraud? ...mind you, bad financial decisions aren't fraud. And 'presumption of abuse' is not about your character or intentions, just a numbers on paper analysis

2) Is there $ to fund a Ch 13 plan?

For fraud, I'll bet they use standard accounting methods: verify income & assets, follow the money trail, make sure input/outgo match, etc. When the UST does a random audit, they usually hire an accounting firm to do it for them.

The Ch 13 determination is pretty straightforward: income minus expenses = ?? Over $187 usually (but not always) puts you into a Ch 13

Income is not too hard to verify and you already documented the last 6 months of it for the initial filing.

Expenses are numerous, so harder to verify and document. Expect this to be the major battle.

Your situation is where a good attorney earns their pay. It's new and scary to you, but your attorney has seen this before and should know what to do.

Hang in there, keep us posted on how things work out!

Tom in Colo

[ValleYum]

The UST's website gives the random audit figure as 1:1000. So even less likely than reported in the ***** article.

Thanks debee!! Makes me a teensy bit less scared.

[cw99]

Just got back from 341 meeting and while we expected to see the PA Trustee and the assistant to the UST for her to question us as well, what we didn't expect was the UST to show up...with our 300 page answer (don't ask...he wanted all the c/c statements, etc) in hand. I did my very best to answer all of his questions and aside from focusing on the new vehicles we purchased in August (based on our previous attorneys recommendation because we thought we would be in a Chapter 13 and needed vehicles to survive through the plan), he seemed very focused on the value of my salesmen samples and also the trade show expenses that we incur. He seemed annoyed that our Schedule J didn't reflect the "future" income/expense and our attorney stated that the only objective way to evaluate the future is to use the numbers from the past which she did. The questioning went on for nearly 45 minutes which was substantially longer than all previous people there and at one point the PA Trustee asked the UST if he was finished and suggested that he needed to "wrap it up". Aside from almost vomiting while sitting there answering the questions (which was apparently obvious to everyone viewing this), I don't know what to think. I want to be optimistic in thinking that if we provide him the amendments and inventories that he wants to see, that he will be satisfied but I just don't know. As much as we thought it would be about converting to a 13, he basically stills seemed to be dwelling on the fact that we were at the time we filed, $4800/month in the hole which was an accurate number based on the 6 month look back. Does anyone have any thoughts or similar experiences?

[researchnerd]

Ugh. I don't have anything helpful to add, but wanted to say that I am soooo sorry you had to go through that ordeal at your 341. It sounds absolutely agonizing.

[cw99]

It actually was kind of awful and while we expected some of it, I was definitely taken aback by the UST's presence and also his area of questioning. We know that our BK is not run of the mill with a business (with huge swings of income/expense) and the fact that we do have assets (which are currently all exempt). I just don't understand how they are supposed to make a determination of pursuing the motion to dismiss or convert with just that "short" question/answer period. While it wasn't short by 341 standards, i think that it would be quite difficult for them to grasp all of the variables. Our written answer from the attorney including narratives should go to that end, but it just seems like it will be easier for him to file the motion than sort through everything. I don't know...I am sooo confused and sooo emotionally drained right now.

[researchnerd]

Sometimes I wonder how much of that UST stuff is for real and how much is just to send the message that they're looking into things...and to cover their own asses with documentation in case anyone questions their findings in the future. We were well over median and they requested some pay statements and bank statements, plus a written statement about why we converted from Ch13 to Ch7, but after that we never heard a peep out of them. NOT that I am complaining!!