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What is a 2004 Examination?

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Bankruptcy is generally, for most debtors, a fairly trouble-free process. Although bankruptcy laws are complex, and you can lose property if you are not careful and don’t know what you’re doing, assuming that there are no problems, a bankruptcy discharge can be granted with minimal time, trouble and aggravation.

Until problems arise, that is. When the bankruptcy trustee suspects that there may be a problem, the trustee can request what is known as a “2004 examination” (named after a part of the bankruptcy code, not the year 2004). This is similar to a deposition, and the trustee will sit the debtor down and ask the debtor about almost every fact of the debtor’s finances, income, assets, and debts.

Why a 2004 Exam Gets Requested

What causes a trustee to order a 2004 examination? There can be many reasons, but the most common include:

  • The debtor has property that can be taken by the trustee, and the trustee wants to learn more about it
  • The debtor is trying to discharge debt that may be non-dischargeable, and the trustee wants to learn more about it
  • The trustee suspects that the debtor has lied on their bankruptcy paperwork, or suspects some kind of fraud (such as transferring assets to someone else right before filing bankruptcy to try and protect it from being taken).
  • The trustee suspects the debtor has paid off certain creditors right before filing bankruptcy

The debtor is not the only person that the trustee can have answer questions in a 2004 examination. For example, if the trustee believes that the debtor has transferred property to a friend before filing bankruptcy, the trustee can notice that friend to sit for the exam.

An Exam May Not be Bad News

Just because the trustee wants an examination doesn’t mean that you (or anyone else) did anything wrong, and it does not mean that you won’t get your discharge. Usually, 2004 examinations are just fact finding missions by trustees, although certainly the fact that the trustee wanted an examination in the first place indicates they may see a problem. Still, in many cases, debtors sit for the examination, and then get their bankruptcy discharge afterward, without any problem.

What Will be Asked at the Exam

At the examination, the party being deposed or asked questions should be prepared to answer detailed questions about transfers of property, financial transactions, income, and the value, condition, and location of any personal property. Anything the debtor owns, such as a business, will be the subject of very detailed questions.

Sometimes, the 2004 examination can be avoided by compromising. If the trustee wants an examination because they believe that, for example, the debtor owns some property of value and the trustee wants to learn more about it, the debtor may be able to avoid the exam by offering to pay the trustee a nominal amount in return for being able to keep the property, and avoid the 2004 examination. This will largely depend on why the trustee wanted the exam and the value of the property at issue.

The West Palm Beach bankruptcy lawyers at Kelley, Fulton & Kaplan at 561-264-6850 can help you understand all parts of your bankruptcy case, and assist you in obtaining your bankruptcy discharge. Call today for a consultation.

Resource:

law.cornell.edu/rules/frbp/rule_2004

https://www.kelleylawoffice.com/in-bankruptcy-you-can-own-property-without-owning-property/

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