A bankruptcy audit is an independent look at a bankruptcy case, to ensure that it is accurate and honest.
As more people are aware of the pros and cons of filing for bankruptcy, the risk of bankruptcy fraud increases, which means that checks and balances are needed to ensure that bankruptcy petitions are accurate.
If you’ve filed for bankruptcy, then you’ll know what a relief it is to be free from your debts and to be able to get on with your life.
In very rare cases, people who file for Chapter 7 Bankruptcy or Chapter 13 Bankruptcy are either accidentally or deliberately dishonest.
Here’s what you need to know about bankruptcy audits.
1. Bankruptcy cases are audited
Chapter 7 Bankruptcy and Chapter 13 Bankruptcy cases are audited, to ensure that they are genuine and honest, and also to monitor fraudulent activity. Bankruptcy cases are audited by public accountant or audit firm.
2. Verify accuracy
One of the main reasons for the bankruptcy audit is to check the accuracy of your bankruptcy, and the information you provided.
As long as you were honest with your bankruptcy attorney, then you will have nothing to worry about.
If you filed your case yourself, then you might be worried about whether you filed the paperwork in property, and whether you mentioned all your debts and creditors.
3. Know within two weeks
If your case has been chosen for a bankruptcy audit, then you can expect to be informed within 2 weeks of filing.
This short timescale increases the chance of you still having your information and paperwork to hand, and that you can still remember the specifics of your case.
4. Provide your documents
You will need to provide several documents for your bankruptcy audit. These documents include your tax returns, bank statements and payslips. You will also need to provide details of property bought or sold within 2 years prior to filing. Your bankruptcy attorney will be able to help you as necessary.
5. Comparing information
The auditors will compare the information you provided in your case, and the information you provided as part of your bankruptcy audit to make sure that it matches.
6. Any anomalies
Any anomalies in your case or your documentation will be found, and you will be made aware of them. The chances are that any anomalies will be accidental, and your bankruptcy case will be amended as necessary.
7. Accidental or deliberate
The chances are that any anomalies found during the bankruptcy audit will be accidental, and your bankruptcy case will be amended as necessary.
However if you are found to have deliberately lied in your application, then your bankruptcy case is likely to be dismissed, and you will be liable for your debts again.
8. 1 in 250
Around 1 in 250 bankruptcies will be audited, so whilst there’s not a high probability your case will be selected, it won’t come as too much of a shock if you are chosen.
9. Red flags
There are several red flags which might make the auditors interested in your case. Perhaps you’ve got a higher than expected income or expenses compared to other similar people filing for bankruptcy in your location.
10. Importance of bankruptcy attorney
Because there is chance your bankruptcy case will be audited, you’ll want to make sure that everything is done properly, and that your case doesn’t stand out from the others.
Your bankruptcy attorney is highly experienced, and skilled in filing Chapter 7 Bankruptcy and Chapter 13 Bankruptcy.
This means that they will know much more about the red flags the auditors are looking for, any potential issues and how your case may appear look to the auditors.
Another reason not to file for bankruptcy yourself, and proving that you need an experienced bankruptcy attorney.
Now you know what to expect if your Chapter 7 Bankruptcy or Chapter 13 Bankruptcy case has been selected for a bankruptcy audit.
Our experienced bankruptcy attorneys ensure that every aspect of your case is done properly, in accordance with the rules and within the timescales. This reduces the risk of your case of being selected for an bankruptcy audit.
Still worried? Contact Us today on 612.824.4357 and tell us how we can help you stop thinking about money, get peace of mind, and sleep better.