Your Chapter 7 bankruptcy trustee is assigned dozens of cases each month and must process these cases as efficiently as possible. Most of these cases speed through the bankruptcy process to discharge without complication. Avoiding the attention of the trustee is a joint responsibility of your and your attorney. So how can you “fly under the trustee’s radar?”
Step 1: Tell Your Attorney EVERYTHING
You have a legal responsibility to disclose all of your assets, debts, income, and expenses. Your attorney’s job is to protect your income and assets, and ensure your debts are discharged. Your attorney will devise a game plan for your case based upon the information you disclose. If the trustee discovers something that you have concealed or forgotten, your attorney’s preparation is blown and now you are squarely in the trustee’s spotlight.
Step 2: Be Detailed
If your bankruptcy schedules report an asset without providing additional information, the trustee may ask questions. Make no mistake, questions from the trustee are always bad! For example, your high mileage 2008 Chevrolet Malibu may be reasonably valued at $4,000, but if you do not give the trustee sufficient information and details about the car, you will have to explain your valuation at the 341 meeting. Fully disclosing within the schedules demonstrates that you are confident about your valuation and have nothing to hide.
Step 3: Fill Out the Forms
Debtors and careless attorneys routinely leave blanks on the schedules. Two items that are often good indications of careless reporting are Bank Accounts, and Jewelry. A debtor who leaves these items blank is stating, under oath, that he does not have a bank account or own jewelry. The trustee will always ask. This can get comical when the trustee asks about jewelry and the debtor is wearing earrings, a wedding ring, a watch, a necklace, or a nose ring!
Step 4: Provide Documents
The trustee is required to examine tax returns and pay statements. Most trustees want to verify the amount of money in your bank account on the day you file bankruptcy, so bank records are requested. If you fail to provide these documents, you have placed yourself on the trustee’s short list of interesting debtors.
Step 5: Be Consistent
Are your bankruptcy schedules consistent? For example, if you reported an income of $100,000 for the prior year, and currently report income of $2,000 per month, you are waiving a red flag of inconsistency that the trustee will examine. Likewise, if you report a car payment as a monthly deduction, but do not list a car on your property schedule, guess who must answer trustee questions?
Step 6: Do Not Volunteer Information
One of the worst things to do at the 341 meeting is to volunteer information to the trustee. Some people get nervous and start confessing details about their finances. This often appears the result of a guilty conscience and suddenly the trustee is very interested in you and your case – even when there is absolutely nothing to hide!
Keeping out of the trustee’s crosshairs is a matter of common sense. The Chapter 7 trustee has a job to do and by providing documents and information, you make that job easier. Working closely with your bankruptcy attorney to detail your finances will make your bankruptcy case go smoothly.