What Does the Audit Firm Do If My Bankruptcy Case is Chosen For Audit?

01 Nov What Does the Audit Firm Do If My Bankruptcy Case is Chosen For Audit?

If your bankruptcy case is selected for an audit, the audit firm first sends your attorney a list of documents that need to be sent to them within 21 days. If neither you nor your lawyer respond to the auditor’s requests for documents, or if an insufficient response is received, they will file a Report of No Audit. This also happens if the case is dismissed before they receive a sufficient response.

If a Report of No Audit is filed, the United States Trustees office may take enforcement action. You and your lawyer should take the audit process very seriously, as there can be serious consequences if the audit does not go well. Prompt communication with the audit firm is one of the most important ways to make sure that you successfully survive the audit process.

Once you send the requested documents to the audit firm, they will review the documents you provide, as well as your bankruptcy schedules, and the Statement of Financial Affairs you filed with your bankruptcy petition. They also perform a desk audit using automated search engines including commercial databases, searching for assets you may own, including real property and vehicles. Their main job is to determine the accuracy, veracity and completeness of your bankruptcy documents.

The audit firm prepares and files with the court an audit report specifying if there are any “material misstatements” of income, expenses or assets. If a material misstatement is found, the Court Clerk notices all creditors in the case. The US Trustee will then decide whether to make a motion to dismiss the case, object to confirmation of a Chapter 13 case, revoke a confirmed plan, demand an amendment to the bankruptcy schedules and/or take action against debtor’s attorney.

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Peter Orville is a bankruptcy lawyer in Binghamton, located in the Southern Tier of New York. He is a member and New York co-chair of the National Association of Consumer Bankruptcy Attorneys.
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