U.S. Trustee Program Suspends Debtor Audits

The U.S. Trustee Program last month said it has “indefinitely suspended”¬†the debtor auditing process “due to budgetary constraints,” the Wall¬†Street Journal reported yesterday. The Bankruptcy Code amendments of 2005 authorized U.S. trustees to randomly designate for audit one out of every 250 consumer bankruptcy cases per federal judicial district. The Code also authorized audits of any cases in which debtors posted statistically unusual income or expenditures. Trustees select the cases but do not perform the audits; instead, that job falls to independent accountants. The 2007 fiscal year saw random audits of “at least one out of every 250 consumer cases” per judicial district, according to a USTP report. But the following three fiscal years saw that rate reduced to one out every 1,000 consumer cases per district due to “budgetary constraints.” The auditing rate was reduced even further in the 2011 fiscal year to one out of every 1,700 cases, but the audits were suspended for the last few months of that year and through the first three months of the 2012 fiscal year. While USTP resumed random audits between January and October 2012, it did so for one out of every 1,450 consumer case per district.

M. Erik Clark
<http://blclaw.com/>
100 N. Barranca Avenue, Suite 250
West Covina, CA 91791

www.blclaw.com <http://www.blclaw.com/>
Office: (626) 332-8600
Fax: (626) 332-8644
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