When Congress changed the new laws back on October 17th, 2005 (yes, that is the date that most bankruptcy attorneys will never forget!), they also added another element to the law change: the dreaded audit. Audits were suspended earlier this year because of funding cuts. But, on May 12, 2008, they resumed. Apparently, the suspension of the audits drew criticism from the supporters of the new bankruptcy laws because the audits, as the supporters say, are necessary to help control abusive bankruptcy cases.
The Wall Street Journal released an article in their July 22, 2008 paper reported that out of all of the bankruptcy cases that were audited, 30% were found to have misstatements in the debtors schedules. Further in the article, Scott E. Talbott, senior vice president of governmental affairs for the Financial Services Roundtable, was quoted as saying "The Audits will help prevent abuses of the system, maintain integrity of the bankruptcy system and provide policy makers accurate insight into the financial condition of the people who file for bankruptcy".
I agree with what he says. It now makes it more of a risk to try and cheat the system. And if you get caught, well you could be looking at some serous time in prison. However, I would guess that 98-99% do not intend to cheat the system. Most of my clients have truly fallen through tough times and either need a fresh start or a debt payment plan. I would find it very difficult to believe that out of the 30% of audits that lead to misstatements of the debtors schedules, all of them or even a majority of them were intentional. Most misstatements are probably honest mistakes that either the debtor's attorney failed to catch or the pro se debtor who had not a clue as to what he or she was doing.
I have had a few clients audited. The audits went very well with each one of them and there were no misstatements. I do not like having to deal with the extra work an audit may bring, but I am in favor of them. Let's face it, if a debtor tells the truth from the start and lists everything in their schedules as they should (which is a reason why all debtor's should seek counsel), then an audit should be short, quick and painless.
Brian Limbocker
Limbocker Law Firm, LLC
2470 Windy Hill Road SE Suite 300
Marietta, GA 30067
Phone: 770-933-5355
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