In these economic times, more people with retirement accounts and significant assets are inquiring about filing for bankruptcy protection. One of the most frequent questions I am asked is what documentation do I need to file for bankruptcy? The simple answer is, if it is listed on the bankruptcy petition you need documentation. Although it may be a hassle, the difference between having your debts discharged and having your petition dismissed may rest in your ability to dig out those old statements, pay stubs, bank records, and real property documentation. As part of the reforms of the Bankruptcy Abuse and Prevention Consumer Protection Act of 2005 (BACPA), debtors filing for bankruptcy protection have been subject to random audits to verify the accuracy and completeness of debtors’ bankruptcy filings. 28 USC 586(f). Selected randomly, each judicial district audits approximately one out of every 250 cases. If selected for an audit, you will have twenty-one (21) days to provide the audit firm with the requested documents which can vary but will likely include six (6) months of pay stubs and bank account statements, last two (2) federal tax returns and any property settlement documentation. If the requested documentation is not provided in a timely fashion, a discharge can be denied. 11 USC 727(d)(4).
As with the practice of any type of law, an attorney can only provide good advice if the client provides all of the necessary information. All too often individuals think they do not need to disclose an asset, debt or transaction because there is no way the court will discover it. However, this method of reasoning can lead to trouble that could have been avoided it disclosed to ones attorney. For instance, a bankruptcy trustee examines recent purchases and transfers. In certain circumstances, the trustee can also reclaim property or deny discharge of a debt it there is a determination that the property was fraudulently transferred or purchased. In that instance, a bankruptcy attorney can provide legal advice as whether filing for bankruptcy should be delayed or additional steps taken to avoid an adversary proceeding.
If you are considering filing for bankruptcy, the best time to gather documentation is now as some documentation may take several days or weeks to obtain from past creditors or financial institutions. Having the required documents in hand will enable your attorney to provide sound advice and expedite the process if your case is selected for an audit.
- Richard V. Stokan, Jr.