[CNYBBA-LISTSERV] Random Audits start 10/20/06

[Richard Ruswick]

Given the possible penalties involved, how can the debtor's attorney possibly allow direct contact between the UST and the debtor?  This is just another time-taking monster that we have to build into our fee schedule.
   
  Dick Ruswick

Lynn Harper Wilson <lhwilson at cnytrustee.com> wrote:
      I was at a conference last week and one of the speakers was the U.S. Trustee from Region 6.  He gave some information about the upcoming audits, that I thought you might be interested in.  (I also heard this at the NACTT conference in Denver but didn't write it down then.)  I'm sure Guy will let us know if I have any of this information wrong.
   
  The audits are going to start on 10/20/06 and one out of every 250 Chapter 7 & 13 cases will be audited.  The cases will be selected at random by a computer program.  A team in Washington will notify the auditor when documents are filed in the case.  The local UST will send an audit notification to the debtor (& atty, I presume) & Trustee with a list of documents for the debtor to produce, a form for the debtor's attorney to allow direct contact with the debtor, and an information sheet.  A notation will be made on CM/ECF that the case is being audited, and the Court Clerk will not close the case until the audit is completed.
   
  The debtor will have 21 days to provide the requested documents.  Then the auditor will have 21 days to complete the audit, although they make take a little longer.  The whole process should be completed within 70 days of the petition being filed.  "Targeted audits" will also be selected by the Washington D.C. team.
   
  The audit will be a "desk audit."  Two commercial database searches will be performed, and the debtor will be given an opportunity to explain any apparent "material misstatements" in the petition.  They do not contemplate having face-to-face meetings or site visits.
   
  The information required will be paystubs for six months; tax returns for two years with attachments; account statements for six months before the petition was filed and the month the petition was filed; copies of divorce decrees, property settlements, and child support documents.  They will only be looking at the original schedules, not amendments.  They will not say what is on the list of "material misstatements" they are looking for.
   
  Reports will be filed with the Bankruptcy Court.  One of three kinds of reports will be filed:  1) report that discloses material misstatements, 2) report of no material misstatements, or 3) report of no audit (i.e. case was dismissed before audit was completed or debtor failed to coopertate).  The clerk will send notice to creditors if material misstatements were discovered, although the notice will not say what the material misstatements are.  The creditor can look at the report on CM/ECF if they want to know.
   
  "Enforcement options" include:  criminal referral, objection to discharge or action to revoke discharge, motion to dismiss with prejudice, objection to confirmation, motion to modify plan (or request for Chapter 13 Trustee to do it), motion to convert, avoidance actions (by panel Trustees), discovery (motions to compel), sanctions against attorney, motions to compel amended schedules.
   
  ***************************************
Lynn Harper Wilson, Staff Attorney
Standing Chapter 12 & 13 Trustee's Office
Syracuse, New York
    e-mail: lhwilson at cnytrustee.com
        web site: http://www.cnytrustee.com 
   
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