Chapter 7 & Chapter 13 Panel Trustees
The Chapter 7 or Chapter 13 panel Trustee conducts the 341 hearing. Although we call it a hearing, it is far more like a deposition. The bankruptcy trustee asks questions about the accuracy of the petition, requests documents, and reviews assets and income. Most people think the bankruptcy trustee is a judge. He isn’t. He is normally another attorney with an accounting background or a CPA license. You are however under oath in a federal court proceeding. Here are the questions the Chapter 7 Trustee will ask.
The Chapter 7 trustee is paid about 60-70 dollars per petition review. If the petition is accurate and supported by documentation, the bankruptcy trustee can quickly do his job and go on to the next case. If he can find assets and sell them he gets about a 25% commission on the first 5,000 on a sliding scale. His duty is to insure that the petition is accurate and to pay creditors from any available assets. There are rarely any assets for the trustee to take after we apply exemptions.
Even if he takes a 10,000 dollar car for some richer clients it may be worth it to destroy 25 million in debt. Sort of like sacrificing a pawn to win the game. If your petition is not accurate it will cause him additional work. An inaccurate petition may result in a second hearing, cause you to lose property or may result in an audit similar to an IRS audit called a 2004 deposition which may last hours. It is very important that all the information you give to us is accurate so that we can avoid these complications.
Your US Trustee
The Chapter 7 debtor has a responsibility to use his best efforts to repay debt. Occasionally, some debtors will attempt to hide income in order to file a Chapter 7. This rarely works and should be avoided by debtors at all costs. Every petition is reviewed for accuracy by the US trustee when it is filed. Sloppy petitions and debtors with high incomes over $100,000 per year are audited much more closely. Petitions are also audited for abuse and persons with high incomes that file Chapter 7 petitions that include luxury expenses which abuse the system will be required to convert to a Chapter 13. If the petition is inaccurate or does not supply the required documentation the petition may be dismissed.
The Bottom Line
The easiest way to avoid filing errors and sloppy petitions is to have your petition prepared by a qualified bankruptcy attorney with years of legal experience before submitting it to the bankruptcy trustee. Always make sure the information you give to your lawyer is accurate. Never try to hide income, assets or transfer assets just before filing, in a bankruptcy as it can lead to delays and excessive legal and personal cost.