U.S. Trustee investigating for fraud

[rwiggum]

There are already some threads on this topic, but I decided to start another one to summarize what has been said and also to ask others who received an "abuse" letter to share what actually happened as a result.

My attorney today received a letter from the US Trustee basically informing him (and me) that my case is being reviewed for possible abuse. It includes a list of 13 items they would like me to provide. It is everything from 6 months of bank statements to whether I took out any loans against my 401k account. They want the information by 11/21, the day before my 341 meeting.

Like others who have asked about this, I have a high amount of debt (134K), very little in assets, and a reduced income. I am also technically self-employed at this point. I took a temporary job working for a foreign company. Probably alot of red flags here. I used an attorney, so I don't think filing pro se would be a cause as was suspected in another thread.

At this time I have two concerns: (1) I might not be able to provide all of the requested information and therefore might not be able to "prove" that I did not commit fraud and (2) I don't know how this will affect 341 meeting. I was expecting that their questions would be impersonal/generic. But one of the questions in the trustee's letter asks me to generally explain how I ended up with so much debt.

If anyone out there has received a similar letter, what happened?

[BassBoy]

Is your $134K of debt all unsecured? I've read that over $100K of unsecured can be why a Trutee wants to review a case like such a little more closely.

[onlineuse]

What's the worst that can happen? Would they bump you to a 13?

[rwiggum]

It is all "general unsecured debt". I figured the fact that I am temporarily working overseas would get someone's attention. I did file in the district where I have my permanent residence.

[BassBoy]

What's the worst that can happen? Would they bump you to a 13?

No, not necessarily. It's just that over $100K in unsecured debt raises a few red flags.

[FoolAndHisMoney]

No, not necessarily. It's just that over $100K in unsecured debt raises a few red flags.

Especially with little assets and low income.

[HHM]

The red flags were the high amount of debt, sudden decrease in income, and being self-employed. They are probably looking to see when the debt was incurred and what your financial situation was like when you incurred it. As to your questions.

1. If you don't provide everything they ask for when they ask for it, they can DISMISS your case. (or you better have a damn good explanation for why you can't provide it.)

2. Understand that the US Trustee is different from the Bankruptcy Trustee. The US Trustee is an arm of the Dept. of Justice. So, if an attorney shows up to the 341 from the US Trustees office, there will be YOU, the BK TRUSTEE, and the Attorney from the US Trustee.

In any event, good luck...and you better go about getting the documents the US Trustee requested.

[CATCHMEIFYOUCAN]

Don'tcha have like unsecured cc statements, loans you may have taken?

Catchmeifyoucan

[Faith]

My attorney today received a letter from the US Trustee basically informing him (and me) that my case is being reviewed for possible abuse. It includes a list of 13 items they would like me to provide. It is everything from 6 months of bank statements to whether I took out any loans against my 401k account. They want the information by 11/21, the day before my 341 meeting.

Like others who have asked about this, I have a high amount of debt (134K), very little in assets, and a reduced income. I am also technically self-employed at this point. I took a temporary job working for a foreign company. Probably alot of red flags here. I used an attorney, so I don't think filing pro se would be a cause as was suspected in another thread.

At this time I have two concerns: (1) I might not be able to provide all of the requested information and therefore might not be able to "prove" that I did not commit fraud and (2) I don't know how this will affect 341 meeting. I was expecting that their questions would be impersonal/generic. But one of the questions in the trustee's letter asks me to generally explain how I ended up with so much debt.

If anyone out there has received a similar letter, what happened?

We (husband and I) got essentially the same letter from the U.S. Trustee. We have high unsecured debt $120,000 in credit card debt and $55,000 in student loans and some disputed tax debt, which has since been resolved favorably for us. We are self-employed and our income is reduced significantly from when we incurred the bulk of the debt. My husband had medical problems and suffered from severe depression so he lost his job. We had little in the way of assets as we had already lost our home and our cars are both over 10 years and 200,000 miles.

Anyway we got the letter from the U.S. Trustee within about a week of our 341 meeting, investigating for abuse, need a bunch of information, including an explanation of how we got our debt, how we intended to pay it off, etc. The U.S. Trustee wanted bank statements, tax returns, some business records, a picture of what our debt was like a year before we filed.

Long story made short, we busted our tails and got the U.S. Trustee everything he wanted. And the U.S. Trustee never responded, never filed anything. The 60 day period for objections passed and so we feel better. But we sweated for awhile.

My attorney said these letters have become common in his cases where the unsecured debt exceeds about $100,000. My attorney emphasized to us the extreme importance of getting the U.S. Trustee (actually was a bankruptcy analyst with the U.S. Trustees office in our case) everything he asked for. We were told far more cases are dismissed for failure to provide documentation than for abuse.

In any event, if you get the U.S. Trustee what he asks for, I suspect you will be okay.

Faith

[LostOne0069]

We also got a letter like that... and we have about $125k in unsecured debt and no assets... We were lucky n that all they asked for was "all statements and records pertaining to the $125k of unsecured debt." So we sent then 5 years worth of credit card statements and bank statements. We sent this about a week before our 341 (which was this monday) and we heard at the 341 from the trustee that HE had heard from the US trustee and that they were satisfied... So don't panic. As long as you're on the up and up, you'll be OK. Just send them EVERYTHING that you can think of. Sending too much is WAY better than sending not enough.

[quietsound]

did you all file chapter 7 or chapter 13.................

i would think if you did chapter 13 they wouldn't care how much the unsecured debt is because you would be paying it back.

[FoolAndHisMoney]

did you all file chapter 7 or chapter 13.................

i would think if you did chapter 13 they wouldn't care how much the unsecured debt is because you would be paying it back.

I can't answer for anyone but this is mostly for chapter 7 cases. I never saw anyone post this problem here with chapter 13 cases. The US Trustee is mostly trying to get 7 debtors into 13's. 13 debtors mostly have problems with their trustee claiming that debtors aren't commiting all of their disposable income to the plan so they move to block confirmation.

[ChainSmokin]

When will a US Trustee typically notify someone of a review for possible abuse, before or after the 341 meeting?

thanks!

[BK'd-Betty]

We were notified at the 341, but we weren't provided the details of what the US Trustee wanted until about a week later.

We also had all of the above red flags - self employed - $130k in unsecured - major drop in incomce.

We provided all documentation and our case was continued for 9 more months. However, in the end the US Trustee didn't file any motions and finally contacted our attorney that he was satisfied, we were finally discharged a month later.

[ChainSmokin]