Does a Bankruptcy Trustee Check Bank Statements?

by Rebecca K. McDowell ; Updated June 29, 2018
Does a Bankruptcy Trustee Check Bank Statements?

When you file for bankruptcy protection, the trustee effectively puts your life under a microscope – at least any part of it that has to do with your finances. He must have a complete picture of your income, assets and debts so he can so he can manage your case. He can ask for your bank statements, and if he does, you're obligated to turn them over.

The Role of the Trustee

When you file for bankruptcy, all your assets and liabilities make up your bankruptcy estate. The trustee's job is to assess the extent of your assets and income to make sure your creditors receive as much money as possible. This happens differently depending on whether you've filed for Chapter 7 bankruptcy or Chapter 13. If you filed for Chapter 13, the trustee's job is to liquidate non-exempt assets and use the proceeds to pay down your debts before discharge. If you filed for Chapter 7, this involves making regular payments to the trustee which he then apportions among your creditors in an order of priority.

The Meeting of Creditors

Shortly after you file for bankruptcy, the court schedules a meeting of creditors, also sometimes called a 341 hearing. You don't have to go before a judge; you'll just meet with the trustee. He'll ask you questions about your property and your finances, and you must answer under oath. Your creditors can attend this meeting and question you as well, although they rarely do. The trustee can ask you to bring bank statements to the 341 hearing or to provide them to him sometime before or after the meeting.

He'll look for large cash withdrawals, large check payments, large electronic transfers and large deposits. He'll want to know if you're as poor as you say you are, how you've been spending your money and whether you've received any large sums of money. The most common reason for a trustee to review bank statements is to look for preference payments and fraudulent transfers – instances where you paid off a debt prior to filing so it wouldn't be included in your bankruptcy or tried to move property out of your ownership to avoid having it liquidated in a Chapter 7 proceeding.

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Preference Payments

The bankruptcy code allows trustees to undo any payments you made to creditors within 90 days of filing for bankruptcy if they exceed $500. If you made a payment to a business associate or family member, the deadline extends to one year. The trustee can demand that the creditor return that money to the estate so it can be shared equally by all your creditors. The idea is that none of them get left out in the cold because you preferred to pay one off, but not the others.

Fraudulent Transfers

The trustee will also review your bank statements for evidence of fraudulent transfers, and he can also avoid or undo these transactions. A fraudulent transfer refers to any money or property you gave away within two years of filing your bankruptcy petition, particularly if you did it to hide the money or property from your creditors. Examples include selling property for far less than its fair market value or moving money into someone else's account to keep creditors from seizing your funds. If the trustee can prove such transfers, he can demand that the person who received the funds or property return them to the estate.

About the Author

Rebecca K. McDowell is an attorney focused on debts and finance. She has a B.A. in English and a J.D.

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