Bankruptcy Audits: U.S. Trustee Finds Errors in 20% of Bankruptcy Filings in 2016

U.S. Trustee reports bankruptcy filers made inaccurate statements about income, property ownership, and asset transfers in 20% of bankruptcy filings in 2016.

March 1, 2017

Each year, the U.S. Trustee conducts bankruptcy audits of consumer Chapter 7 and Chapter 13 bankruptcy cases to determine the accuracy of the filings, and to identify fraud, abuse, and error in the bankruptcy system.

One out of every 250 cases filed is subject to a random audit. The trustee also reviews cases if the claimed income or expenses are out of the norm for the area (called an “exception” audit). In 2016, an exception audit occurred in approximately one out of 925 consumer cases. (The U.S. Trustee stopped conducting exception audits on April 13, 2016, due to budget constraints.)

Out of the total completed audits, the trustee found material misstatements (significant inaccuracies) in 13% of random audits, and 26% of exception audits—an average of 20% total.

In two-thirds of the cases, the debtor (bankruptcy filer) significantly misstated income. The remaining misstatements pertained to property ownership and property transfers.

Here are the districts with the highest, and the lowest, misstatement rates:

  • Louisiana Middle 100% (1 reported case)
  • Wyoming 100% (1 reported case)
  • New Mexico 67% (3 reported cases)
  • West Virginia Northern 50% (2 reported cases)
  • Oklahoma Western 43% (7 reported cases)
  • Washington Western 41% (17 reported cases)
  • Texas Eastern 40% (5 reported cases)
  • Utah 38% (8 reported cases)
  • Maryland 33% (15 reported cases)
  • California Southern 0% (9 reported cases)
  • Connecticut 0% (4 reported cases)
  • Idaho 0% (4 reported cases)
  • Illinois Central 0% (4 reported cases)
  • Michigan Western 0% (6 reported cases)
  • Minnesota 0% (9 reported cases)
  • Mississippi Northern 0% (7 reported cases)
  • New York Northern and Southern 0% (11 reported cases)
  • Texas Western 0% (9 reported cases)

You can review a copy of the U.S. Trustee’s March 2017 Public Audit report here.

Effective date: March 1, 2017