Most chapter 7 bankruptcy trustees in Cook County do a great job of balancing their duties while administering chapter 7 cases. There are more than a select few Trustees who seem to be growing towards advancing these cases beyond what they were intended to be. Let me provide a little background. The duties of a trustee are specifically enumerated in Section 704 of 11 United States Code. The general nature of a trustee’s duties under chapter 7 is to administer the estate of any nonexempt assets that the debtor may have. Specifically, the trustee shall collect and reduced to money the property of the estate for which the trustee serves and close such estate as expeditiously as is compatible with the best interest of parties in interest. In addition to that main duty, the trustee shall investigate the financial affairs of the debtor. This is a broad term that can take on many meanings.
Most trustees take the term “investigate the affairs of the debtor” to be what is done at the examination under oath. This examination in combination with the codes requirement that the debtor provide the most recent federal tax return and two months’ worth of pay advices prior to filing is typically sufficient to investigate the financial affairs of the debtor. However, there is always a trustee or two or now 10 who are seeking additional information prior to the 341 meeting of creditors. Some trustees even have a standing directive that if the information is not provided within a certain number of days prior to the meeting, then the meeting will not be held. This is in contradiction to the bankruptcy code and to the standard practices and procedures used throughout the district.
There is one trustee who instead of demanding the most recent federal tax return which the code provides, seeks two years’ worth of federal tax returns. This trustee has never uncovered in any of my cases a situation where the second year of a tax return has provided any value to the bankruptcy estate. In my opinion, it is truly nothing more than a harassment of the debtor who has been advised by his or her attorney at the time of the initial consultation that only one federal return, the most recent one, was required. Now the attorney and the debtor have to scramble to gather the additional return, submit it to the trustee and for what real purpose other than harassment. When questioned on the requirement, the trustee simply relied on the broad reading of “investigate the financial affairs of the debtor duty.” Once again, this trustee has never uncovered anything probative with regard to the second tax return.
Another trustee continues to push the envelope. In addition to the mandated one year federal tax return and two months’ worth of paycheck stubs prior to filing, this trustee wants the bank statement or statements that covered the period of time when the debtor actually filed bankruptcy. This trustee is trying to play the gotcha game. He wants to find that the debtor had more in the bank account then was listed on the petition at the time of filing. He also wants to uncover transfers, purchases, withdrawals, and other evidence that a bank account can provide in an attempted to discredit the debtor. Now that same trustee is requiring three months’ worth of bank statements prior to filing. I guess the probative and evidentiary value of the one bank statement did not prove fruitful.
What these trustees fail to realize is that there is not massive bankruptcy fraud occurring in this jurisdiction. People are not running up credit, transferring money out of their name, and engaging in other nefarious conduct to simply get over on the bankruptcy court. People are undergoing a drastic an ongoing hardship in this country. Wages have not risen in recent memory. Jobs have not been created in recent memory. The cost of everything from housing, food, clothing, health insurance and other necessities has gone up and up. Debtors are simply forced into a position where they have to file a chapter 7 bankruptcy simply to continue to survive. I wish some of the bankruptcy trustees would attempt to understand that fact.
If the bankruptcy trustees in this jurisdiction continue to overreach with their investigations and demands for documentation prior to the initial 341 meeting, bankruptcy attorneys are going to start to resist these overreaches. We will eventually go to a hearing before one or many of the federal bankruptcy judges in this area to determine whether or not a trustee in his role of investigation is demanding too much, too soon and without just cause. My opinion is that many of the bankruptcy judges will determine this conduct to be overreaching without any probable cause to perform an in-depth investigation of the debtor.
