The office of the United States Trustee, a division of the Department of Justice, recently announced that it now has the funding to resume random audits in consumer bankruptcy cases. Commencing March 10 2014, the office of the UST will reactivate its program of randomly selecting cases to review, seeking to find any misstatements or other questionable items in consumer filings.
These audits commenced after congress amended the Bankruptcy Code in 2005, at which time it directed the office of the UST to seek out any fraud in consumer debtor cases and suggested that one out of every 250 cases be examined for unusual amounts of income or expenses. While the UST selects the cases to be audited, the actual audits were conducted by independent accountants, who then reported their findings to the UST Office.
After an aggressive and much publicized start, the audits slowed down due to their costs, and then were suspended last year due to the tight financial situation in the entire federal government. It was reported that in most of calendar year 2012, only one out of every 1,450 cases were examined by random audits, but that number is expected to increase starting next month.
Michael B. Katz, Esq.
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