Executive Office of U.S. Trustee Suspends Debtor Audits

About a week ago BankruptcyLawNetwork.com reported that the Executive Office of the U.S. Trustee has suspended auditing of debtors filing for bankruptcy because Congress did not fund the audits in the 2008 appropiration. This is good news. Under the 2005 changes to the bankruptcy law, the U.S. Trustee could engage the services of outside accounting firms to audit the records of bankrupt debtors. At least until they find some funding somewhere, and they are looking for alternative sources, this auditing activity will come to a stop.

This does not mean that the Trustees themselves cannot continue requesting detailed information, documents and records from bankrupt debtors; and going over it with a fine tooth comb. It just means that they can’t hire outside accounting help to do it. When these audits were in progress, they only involved a very small percentage of the bankruptcy cases being filed. A much higher percentage of cases were investigated directly by U. S. Trustee personnel without outside help.

It is my hope that the failure to appropriate funds represents the beginning of a backlash against the so-called Bankruptcy Reform Act.

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