What is Chapter 7 Bankruptcy?
When tax season comes, everyone wants to block out the thought of filing their taxes. If you are in the situation of filing for bankruptcy, you will want to avoid it even more! But in every system, including the tax system, some people will find how to play bankruptcy and use it to their advantage. Similar to the IRS, with bankruptcy, audits are filed to try and weed out all of the frauds that attempt to play the system.
While not all bankruptcy claims will end up being reviewed, the possibility of what the outcome of your case will be is a powerful determinant of how the court will see if you are fudging the number of your income. Here is what you should know about the possibility of a Chapter 7 bankruptcy case.
Odds of an Audit
Although your chances of being audited are significantly slim, a lot of it depends on where you live and your filing. The United States Trustee Program, which is in the Division of the Department of Justice is ultimately in charge of overseeing the administration of all bankruptcy cases.
The Federal law limits the trustees’ office to a certain amount of cases every year. This is usually one out of every 1,000 Chapter 13 and Chapter 7 cases each year that is audited. These are extremely slim numbers due to the fact that there are over a million Chapter 7 cases filed every year. On the contrary, the trustee’s office is required to view at the least, one out of every 250 cases in all of the 94 judicial court districts.
The trustee’s office may also flag your Chapter 7 audit that you filed if there are irregularities or strange beings in your filing, They might also flag your case if they find that your income or expenses are far out of the norm than any other circumstances that they see in their office.
What is the Procedure of an Audit?
Once a Chapter 7 audit has been picked for verification, you will be notified immediately, and your case will be handed over to an auditing firm who will, from there ask for additional documentation and evidence that will support your expense, asset, and income statements. You and/or your counsel are required to comply with all of the documentation that is being asked of you. However, you are not obliged to pay for any inspections costs that were incurred.
The audit firm, from there, will review the chapter 7 and all of the supporting documents filing for any material wrong-statements that are regarding income, expenses, and assets. From there, they will submit a report to the bankruptcy court.
What are the Consequences of an Audit?
If the court comes to find that there are no irregularities in your Chapter 7 audit file, everything will process normally. However, if the court concludes that there were some irregularities in the filing, they could either, deny your eligibility to receive a debt discharge, dismiss your case, or refer your case to the Department of Justice to receive a criminal investigation.
Contact a Bankruptcy Lawyer Today
Bankruptcy filings should never be taken lightly. The bankruptcy attorneys at Cibik & Cataldo have 35 years of experience in providing superior, cost-efficient, and value-oriented legal services. Our legal team concentrates solely in consumer and business bankruptcy matters. If you are in need of a bankruptcy lawyer to help you with your case, contact us today at (215)-735-1060 to receive a free case consultation.
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