May 17, 2006
Feb 8, 2007
During 2006 58,000 civil enforcement efforts were initiated with a 96% success rate. Criminal enforcement during the same period increased 36%. Of the individuals filing Chapter 7, only 6% had over median income. Of those 6% less than 9% (or .5% of the total) resulted in Motions to Dismiss. Nation wide Chapter 7 filings are between 30 to 40% of that prior to BAPCPA and Chapter 13 filings are at 70% of pre-Act levels.
2007 Areas of Enforcement Emphasis
During 2007 the Program will be emphasizing: Attorney Misconduct, 727, Criminal Referrals, and 707(b). At the Office of the US Trustee link on the left you can access portions of a presentation made to the trustees on these areas.
Documents at the First Meeting of Creditors
As part of the Trustees duties we are to examine the bank statements provided by the debtors to ensure that the deposits on the statement match the income numbers reported on schedule I and the most recent pay stub. Many debtors have been providing trustees with a print out showing only the balance in the account on the date of filing under the misapprehension that the only use of the bank statement was to determine the assets of the debtor on the date of filing. Those who are providing such a printout are encouraged to continue to do so. However, debtors must also bring to the first meeting of creditors the most recent bank statement they have received.
Pay stubs and other documents provided at the first meeting of creditors should be copies, not originals.
Debtors are required to provide to the trustee a copy of their most recently filed tax return or a tax transcript at least 7 days prior to the 341 hearing. Many debtors have been providing only the first two pages of the return. The OUST has requested that trustees collect the entire return. This is to ensure that the numbers on the first page of the return match the attachments. For example:
Line 7 Wages, Salaries, Tips, etc. match W-2s
Line 40 Itemized Deductions match Sch A
Line 12 Profit/Loss from Business match Sch C
Line 13 Capital Gains/Losses match` Sch D
Line 17 Supp. Rent. Inc., Part., S Corp match Sch E
Sch A#20 Employee Business Expense match Form 2106
Line 48 Dependent Care match Form 2441
Apparently a number of debtors have been preparing and providing false tax returns to trustees in order to hide assets, business activities, and income.
Trustees have been asked to inquire at the first meeting of creditors if the tax return he or she has been provided is a duplicate of a return that has actually been filed with the IRS. In all above median cases (an any close cases) the trustee has been asked to forward a copy of the complete return to the OUST so it can be audited.
Because of a recent decision by Judge Boulden (In re Lawson, 06-22766 and In re Boynton, 06-22812) line 25 of Form 22A may only include a debtors actual tax liability not their current withholdings. From a practical standpoint, what this means is that if the debtor regularly receives a tax refund they are over withholding and line 25 is higher than it should be. The OUST is using debtor returns to determine the correct number that should appear on line 25. To avoid problems you may wish to do this calculation yourself and in close cases to provide the OUST a copy of your calculations and reasoning before the first meeting of creditors.
Clarification was made at the training the debtors are expected to file each separate pay stub in order to comply with the requirements of §521. A single pay stub showing cumulative earnings and withholdings is not sufficient proof of prior receipts.
Apparently some debtors have been attempting to hide cash by pretending gambling losses. As a result, in any case which reports gambling losses of a substantial amount the OUST will audit the case and require proof of losses. If proof cannot be provided a motion to dismiss for failure to keep adequate records will be filed.
Trustee Questions and Answers
A great deal of information, that may also be useful to debtors counsel, may be found at the following location: http://www.usdoj.gov/ust/eo/bapcpa/trustees_faqs.htm