Resumption of Random Audits of Chapter 7, Chapter 11, and Chapter 13 Consumer Bankruptcy Cases.
Random Audits of Under the Bankruptcy Code, beginning with the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), the Office of the United States Trustee was required to perform random audits of consumer bankruptcy cases. Due to budgetary constraints, the Audit Program was suspended in March 2013.
On February 21, 2014, the U.S. Trustee Program (USTP) announced that it will resume designating cases for audit. See the Announcement here. The Wall Street Journal has a good overview of the program and the announced (and actual) rates of audit. Read that article here.
The Bankruptcy Code (28 U.S.C. § 586(f)) allows the USTP to designate certain consumer bankruptcy cases for an independent firms to audit petitions, schedules, and other information in a bankruptcy case. This applies to both Chapter 7, Chapter 11, and Chapter 13 Consumer Bankruptcy Cases.
Our experience in the Audit process in prior New Jersey Bankruptcy cases will allow us to address any audit if it should arise. Through experienced counsel and effective preparation of a bankruptcy petition, the audit process, while time-consuming, should not cause most bankruptcy debtors significant concern. The “designation” of a case for audit is random and not, from the express terms of the Code, a targeted inquiry. It typically involves a timely and complete process of providing documents and information to the independent auditor. For the most part, this is the same information that an experienced Bankruptcy Lawyer will have requested and reviewed with his client prior to the filing of the Petition.
. Pursuant to the USTP contracts with independent accounting firms to perform audits in designated cases.