What’s the bankruptcy trustee looking for when you submit your bank statements before the 341 meeting?
Let me tell you what the trustee isn’t looking for: trustees don’t care if you bought the premium brand of coffee; paid for your kid’s sports team; fixed broken appliances; went on vacation; or bought concert tickets. No part of the Bankruptcy Code makes those expenditures meaningful.
Disclosure is the name of the game
Trustees essentially want to know that your bank records generally match the information you provided in the schedules you filed with the court.
- Do your deposits generally match the income you reported?
- Are there transfers to accounts you didn’t disclose?
- Are there large and unexplained withdrawals?
When things don’t line up
And, if the records don’t align with the schedules, the trustee wants an explanation.
As long as the explanation doesn’t reveal efforts to hide money or assets acquired with that money, you (and your discharge) are just fine.
If examination of the records show you innocently forgot something , that’s OK too. Fix it with an amendment to your schedules.
When your discharge is at risk
OK, that headline is misleading. In the real world, denial of discharge is extremely rare and usually involves crooks.
The Bankruptcy Code starts from the proposition that every individual gets a discharge in their Chapter 7 case. Then, it calls out the exceptions, the reason why a debtor doesn’t get a discharge.
Broadly, the things that result in a challenge to your discharge are engaging in a scheme to hide assets from creditors; failure to make honest disclosure or cooperate with the bankrutpcy system; or having gotten a bankruptcy discharge too recently.
As long as you haven’t committed one of the disqualifying acts, you get a discharge. No one evaluates your pre bankruptcy spending to see if you are “worthy” of a discharge. There is no requirement that you have been frugal, or wise, or disciplined in your spending before filing.
What bankruptcy trustees are looking for is just the full financial story as shown in your records.
