What the Bankruptcy Trustee Looks for in Your Schedules

The bankruptcy trustee reviews your bankruptcy papers carefully to look for hidden assets, avoidable transfers, improper exemptions, and more.

By , Attorney University of the Pacific McGeorge School of Law
Updated 3/21/2023

One of the primary duties of the bankruptcy trustee appointed to oversee your case is to find money to repay creditors. In both Chapter 7 and 13 cases, the bankruptcy trustee will:

  • review the exempt property list to determine whether you can keep all of your assets
  • compare your income to the financial documents provided
  • inspect your budget for reasonableness, and
  • look for signs of transferred or hidden assets.

In Chapter 7, the trustee also looks for property to sell and signs the case should be converted to Chapter 13. In Chapter 13, the trustee will check whether you should pay more to creditors than you've proposed.

What Does the Bankruptcy Trustee Investigate When Reviewing Schedules?

Most trustees will compare the information in the bankruptcy petition and schedules (the paperwork you file with the court) to other financial documents you turn over, such as paycheck stubs, tax returns, and bank statements.

If anything appears unusual, the trustee might request additional items or wait to ask questions at the 341 meeting of creditors—the hearing that all filers must attend (more below).

What Does the Trustee Look For in Bankruptcy Schedules?

Here's what the bankruptcy trustee checks when reviewing your schedules.

Property You Aren't Entitled to Protect

You can exempt (keep) a certain amount of property in bankruptcy. The trustee will likely be particularly on the lookout for these things:

  • income-producing assets such as investment real estate, oil and gas leases, business interests
  • pending claims or lawsuits filed by you
  • nonexempt (unprotected) real estate
  • personal property not claimed as exempt
  • liens that may reduce the value of assets to the estate
  • tax refunds
  • divorce settlements, and
  • partially exempt assets.

In Chapter 7, if the trustee finds property you aren't entitled to keep, the trustee will sell it for the benefit of your creditors. In Chapter 13, you'll have to pay the value of any nonexempt assets the trustee finds through your Chapter 13 plan.

Find out more by reading What Is Nonexempt Property in Bankruptcy?

Transactions the Trustee Can Reverse

If you've repaid creditors or transferred money out of your name recently, the trustee might be able to get the money back. These items might signal transfers that the trustee can reverse and bring back into the estate:

  • excessive gifts (in value or number)
  • transfers for less than full value
  • transfers that prefer one creditor over others, and
  • payments to relatives or others close to you.

Find out more about what the trustee will look for by reading The Bankruptcy Trustee and Preference Claims.

Red Flags in the Trustee Looks For in Your Bankruptcy Schedules

Finding assets isn't always straightforward. The trustee also looks for signs that something is amiss. Here are a few examples.

Hidden Assets

The following items in your schedules might lead the trustee to hidden assets:

  • you undervalued your assets
  • you own expensive artwork or multiple luxury cars
  • debts or expenses for assets not listed in the schedules
  • a claim of a property loss from theft with no police report or a casualty loss with no insurance claim
  • missing financial records
  • closed financial accounts
  • safe-deposit boxes
  • property you claim you're keeping for someone else
  • money owed to you, such as trust income, probate interests, insurance claims, or refunds due, and
  • income from sources not listed.

Learn why you should never try to hide property in bankruptcy.

Property Issues

The trustee will look at the following to help determine whether your claims of exemption (the law that allows you to protect property you'll need to maintain a household and workplace) are proper:

  • the value of the property
  • prior addresses and moves (to determine which state's exemptions apply), and
  • marital status (the rules can get complicated if only one spouse files for bankruptcy).

Chapter 13 Plan Issues

In addition to the other items, the Chapter 13 trustee will consider some of the following things to determine whether the judge will confirm (approve) your plan:

  • your marital status and your spouse's income (your spouse's income gets included)
  • debt that exceeds statutory limits (you won't qualify for Chapter 13)
  • excess income not included in your plan, and
  • whether you transferred assets shortly before filing to avoid paying creditors what they're owed.

Learn more about your obligations under the Chapter 13 repayment plan.

What Does the Trustee Look for in Bank Statements and Other Documents?

Shortly after filing for bankruptcy, the trustee will review your bank statements, paycheck stubs, tax returns, and other documents you must provide. These documents are known as "521 documents" after the bankruptcy code section detailing the financial paperwork necessary to verify the information provided when completing your bankruptcy paperwork.

The trustee will examine your bank statements for evidence of unreported income and property transfers. The trustee might also compare the amount paid toward monthly bills to the amounts reported in your schedules. Learn more about completing bankruptcy forms.

Learn more about bank accounts, automatic payments, and utility payments in bankruptcy.

Some of the Trustee's Investigative Powers

If the trustee questions something in your paperwork, you'll likely be asked about it in the meeting of creditors. But the trustee has other investigative tools available, too.

The Trustee Will Question You at the Meeting of Creditors

Everyone who files for bankruptcy must go to the bankruptcy courthouse at least once to attend a creditors' meeting. You'll be placed under oath, and the trustee will confirm your identity.

Then the trustee asks each filer the same set of standard questions, such as whether you:

  • reviewed the petition before signing it
  • need to change (amend) your paperwork
  • reported all of your income and assets, and
  • expect to receive money from any source.

The trustee will also ask you specific questions about particular issues in your petition. Once complete, creditors in attendance can ask questions about your financial situation; however, it's unusual for a creditor to appear.

The Trustee Might Question You at a Longer Proceeding

If the trustee isn't satisfied, recourse exists. For instance, a trustee who needs more time can reschedule the meeting for another day, reserving an hour or two for your case.

A trustee or a creditor who needs more information can also set up a 2004 examination. It's much like a deposition, but they're rare, so it's unlikely that you'll need to go to one.

The Trustee Can Inspect Your Property

The trustee isn't limited to asking questions. The trustee can also:

  • inspect property
  • take inventory of the items in houses and businesses
  • tour a storage facility
  • review your safe deposit box contents, and
  • initiate other relevant investigations.

You're expected to comply with any reasonable request.

Should You Explain Why You Filed for Bankruptcy?

It isn't necessary to tell the bankruptcy trustee why you filed, and it would be unusual for the trustee to ask. The trustee isn't making a moral judgment but rather ensuring your petition complies with bankruptcy laws.

So you don't need to worry about your case being dismissed because you ran into an unexpected financial situation or even mishandled your money. Those are common reasons that people file for bankruptcy.

For instance, people often find themselves filing for bankruptcy for one of the following reasons:

  • job change or loss
  • medical bills
  • not enough money to pay debt (although substantial debt might suggest fraud), or
  • a failed business.

Learn when it's a good idea to wait before filing for bankruptcy.

When You Might Want to Explain Your Situation

If the trustee finds a particular transaction suspicious, explaining what caused your financial problems might help the trustee understand your motivation for filing. But don't worry about being caught off guard at the 341 meeting of creditors.

Often, a bankruptcy attorney can predict what the trustee might find questionable, prepare you for the same, or even handle the problem by discussing it with the trustee soon after filing the case.

Need More Bankruptcy Help?

Did you know Nolo has made the law easy for over fifty years? It's true—and we want to ensure you find what you need. Below you'll find more articles explaining how bankruptcy works. And don't forget that our bankruptcy homepage is the best place to start if you have other questions!

Our Editor's Picks for You

More Like This

What Happens at the Chapter 7 Meeting of Creditors?

What Happens at the Chapter 13 Meeting of Creditors?

What Happens After the Meeting of Creditors?

Other Articles You Might Like

How to File for Bankruptcy in Your State

Gathering Your Documents for Bankruptcy

How to Fill Out Bankruptcy Forms

Helpful Bankruptcy Sites

Department of Justice U.S. Trustee Program

United States Courts Bankruptcy Forms

We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.

Get Professional Help
Get debt relief now.
We've helped 205 clients find attorneys today.
There was a problem with the submission. Please refresh the page and try again
Full Name is required
Email is required
Please enter a valid Email
Phone Number is required
Please enter a valid Phone Number
Zip Code is required
Please add a valid Zip Code
Please enter a valid Case Description
Description is required

How It Works

  1. Briefly tell us about your case
  2. Provide your contact information
  3. Choose attorneys to contact you