We are talking about a debtor in a chapter 7 case where the U.S. Trustee has requested debtor to produce documents to enable the U.S. Trustee to understand the financial history and financial transactions that led debtor into filing for bankruptcy. The UST may investigate a bankruptcy case which has unusual circumstances to determine if there is abuse of the bankruptcy system. A triggering point of the investigation is high consumer debt level for a low income debtor. For instance, debtor who works as a care giver making $1,500 monthly owes $100,000 of credit card debt. If you consider net income is $1,200, debtor incurred 83 times take home pay. Mathematically, there is no way for debtor with that income to pay off $100,000 of credit card debt. Hence, the UST may ask debtor to explain how she incurred so much debt and what the $100,000 was used for. These circumstances per se do not result in dismissal of the chapter 7 case. However, if debtor is not able to explain what happened, or is able to explain what happened but is not able to produce documents to prove what happened, then the UST will file a motion to dismiss or deny discharge. A legitimate reason, for example, is debtor used the $100,000 to finance a laundry business which failed. The correct response to UST is for debtor to produce the purchase contract for the laundry business, income and expense statements for the laundry, pictures of the laundry and equipment etc. These documents will prove to the UST that the $100,000 of credit cards was used to finance debtor’s laundry business which failed. If such is the case, then the UST will interpose no objection to debtor’s discharge.

《楊清泉律師專欄》FAILURE TO PRODUCE DOCUMENTS RESULTS IN DENIAL OF BK DISCHARGE (Part II)