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  1. #1
    Join Date
    Oct 2012
    Location
    San Diego, CA
    Posts
    3

    Question How Far Back Can a 2004 Exam Go

    My question involves bankruptcy in the state of: Washington

    We have a unique situation with our Chapter 7 where the very people who caused our bankruptcy are now pursuing a 2004 exam and adversarial claims (what they filed was a blanket adversarial claim without any substance; just a placeholder so they don't lose their opportunity since the window has passed).

    Sadly, the Court won't consider their harmful behavior and is treating them like any other creditor.

    The issue is they are asking for bank records and statements from six years ago; their goal is to pick through every single transaction we've made in order to find any issues they can (ultimately their goal is to make the process miserable for us, since there is no other legitimate purpose). Of course we don't have these records and they would have to come from bank accounts long closed.

    There are no major assets or justification for these requests; it's all "proof of income" (and we're talking less than $100,000 a year).

    I've done some research on the 2004 exam and it seems there really is no limitation on the scope; which simply doesn't make sense to me. For example, what do my spending habits or income from 2007 have to do with obtaining discharge now? Absolutely nothing. Yet they're pushing for it with the justification of "we don't know where that money went"; and of course the amount is a middle classed income which would sustain a family - car, food, shelter, etc. Yet they want us to prove where every penny went since 2006 (when we filed in June of 2012). I don't see how this is reasonable, even under a 2004 exam.

    I was under the impression a 2-year window was standard (from the time of filing) for providing documentation and materials. Is there any way to have a 2-year window "enforced" through a 2004 exam in order to limit the extent of records they demand?

  2. #2
    Join Date
    Jul 2010
    Posts
    8,006

    Default Re: How Far Back Can a 2004 Exam Go

    When did your relationship with the creditor begin? Was it 2006?

  3. #3
    Join Date
    Mar 2005
    Location
    Michigan
    Posts
    28,906

    Default Re: How Far Back Can a 2004 Exam Go

    You've chosen not to provide any background information, but I expect that by "the very people who caused our bankruptcy" you mean that you filed your bankruptcy in response to their having sued you for some alleged misconduct, and now they're trying to resolve their civil claim against you through the bankruptcy proceeding. Without your sharing even basic facts you're forcing us to guess about pretty much everything, but one possibility is that they are looking for proof of fraud or other misconduct that might render your debt nondischargeable.

  4. #4
    Join Date
    Oct 2012
    Location
    San Diego, CA
    Posts
    3

    Default Re: How Far Back Can a 2004 Exam Go

    Actually, we went after these people for numerous claims (breach of contract, defamation, etc) and they buried us in legal paperwork (they're millionaires) through expensive lawyers with sham pleadings and false allegations. They also ran a campaign of defamation and acted to prevent me from securing gainful employment. We had a bad judge (who we found out has a history of being rotten) who issued an improper judgment for attorney fees. Their judgment for attorney fees is the basis for their 2004 exam (it was under $10,000).

    The CH7 BK petition has a 2-year window for disclosures (personal, not business). How would it be legitimate for them to try to "find fraud" from 6 years ago? Note there is no basis for their claims at all. They say "we believe he has assets he hasn't disclosed" and "income he hasn't disclosed" with NO factual content supporting their claims at all. Period. It's all made up.

    We were just a middle class family with no money, fully qualify for BK and meet the means test, and there's no outstanding assets of any kind (no homes, and an auto which isn't even paid off). Their reasons for pursuing their 2004 exam and wanting records from 6 years ago simply makes no sense.

    So, to get back to my original question: what limitations are generally applied on how far a 2004 request for documents can go? Technically the 'relationship' with the creditor does go back to 2006, but what bearing would that have on the case when they're a creditor merely holding a judgment awarding attorney fees?

    Don't they have to show there's a viable reason for requesting records that go back that far?

    I find it hard to believe the law allows a creditor to get anything they want for any time period just because they 'believe' something may be without any factual content or evidence of any kind. There's got to be some case law which defines limitations...

    We don't even have the bank statements they're looking for; we'd have to contact the bank and probably end up paying hundreds of dollars for the statements.

  5. #5
    Join Date
    Sep 2010
    Posts
    478

    Default Re: How Far Back Can a 2004 Exam Go

    I hope you have an attny and I hate to tell you this, but the creditor is well within its rights to seek all the financial information it wants. Going back six years, in light of the fact that your relationship with the creditor began six years ago, is not unreasonable.

    The fact that the Code requires you to disclose certain transactions over a two year period is not relevant. That same Code uses other time frames for other transactions. You, as a debtor, are required to maintain records sufficient to allow a creditor or interested party to determine your financial condition (past, present and, possibly, into the future). You can be denied a discharge under 727(a)(3) if you “failed to keep or preserve (records) from which (your) financial condition or business transactions might be ascertained, unless such act or failure to act was justified under all circumstances of the case”.

    Now, if you are the “average joe” then your burden in the requirement to keep records is less than say, a sophisticated businessperson but, you would still have to show that your failure was “justified”.

    To the extent you have documents you must produce them. If you do not have the bank records going back that far, produce what you have and at least give the creditor sufficient additional information so that it can issue a subpoena for the older records.

    You filed a bk. By doing so, under the scope and ease of a 2004 exam, you opened yourself up to a document production that is greater in scope than in normal litigation. That is the price one pays for wanting to obtain a discharge. Many people think that filing a bk is a cake walk and will end the bleeding when there is pending state court litigation. Many of those people later regret their thoughts as bk is not always the best answer.

    If you do not have an attny I recommend you find one.

    Des.

  6. #6
    Join Date
    Oct 2012
    Location
    San Diego, CA
    Posts
    3

    Default Re: How Far Back Can a 2004 Exam Go

    Desprit, I do appreciate your opinion on the situation, but the simple fact is: we're in bankruptcy. We can't afford an attorney. I've been quoted between $5K and $20K (for a retainer) to "take this case". When we filed, we had just a few hundred bucks in the bank.

    Unless you're aware of some method to secure counsel when we have no funds, we're stuck handling this case with no experience and will be forced to battle lawyers hired by the millionaires with just one purpose: to prevent our discharge through any means possible.

    You mentioned they are "well within their rights" but where are their "rights" defined, and where is the limitation of these "rights"? I am curious how you came to your conclusion.

    Also, they have already filed an adversarial claim (more or less a placeholder so they don't lose their right). When they do this, doesn't the law then require a switch to the Fed.R.Civ.P for discovery? (i.e. a 2004 Motion is no longer allowed?)

    It would be nice to get some sort of usable information which could help us relative to this situation. Any case or law citations would be appreciated.

  7. #7
    Join Date
    Jan 2006
    Posts
    38,867

    Default Re: How Far Back Can a 2004 Exam Go

    if you are getting quotes from $5k-$20k for a retainer, that suggests your BK is much more entailed than you suggest in your limited information presented here.


    as to your argument that a rule 2004 exam would no longer be available due to their adversarial claim makes no sense. The 2004 exam is available because they have filed an adversarial claim. It is the means utilized to seek information to support their claim.

    From the germane section of code:

    (a)Examination on Motion. On motion of any party in interest, the court may order the examination of any entity.
    (b)Scope of Examination. The examination of an entity under this rule or of the debtor under § 343 of the Code may relate only to the acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor’s estate, or to the debtor’s right to a discharge. In a family farmer’s debt adjustment case under chapter 12, an individual’s debt adjustment case under chapter 13, or a reorganization case under chapter 11 of the Code, other than for the reorganization of a railroad, the examination may also relate to the operation of any business and the desirability of its continuance, the source of any money or property acquired or to be acquired by the debtor for purposes of consummating a plan and the consideration given or offered therefor, and any other matter relevant to the case or to the formulation of a plan.
    why would the issue of discovery be applicable here? They aren't suing you. The BK code is quite inclusive in its authority.

    You mentioned they are "well within their rights" but where are their "rights" defined, and where is the limitation of these "rights"?
    The examination of an entity under this rule or of the debtor under § 343 of the Code may relate only to the acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor’s estate, or to the debtor’s right to a discharge.
    Kind of wide open, isn't it?


    It would be nice to get some sort of usable information which could help us relative to this situation. Any case or law citations would be appreciated.
    case law or citations for what?

  8. #8
    Join Date
    Sep 2010
    Posts
    478

    Default Re: How Far Back Can a 2004 Exam Go

    Floob,

    You asked to what I rely upon. It’s experience. Dealing with production issues such as yours is what I do. Handling matters pro se will be very difficult for you as you are "expected" to have the knowledge of an attny. I do understand that securing representation is costly and may be out of your reach so hopefully the following will point you in the correct direction.

    Please remember, I can only assist in a very small way and cannot comment on how to follow the Rules of Bankruptcy Procedure as opposed to the Federal Rules of Civil Procedure (most, but not all, of which is applicable in bk.) I can tell you that if an AP has been filed your thought process is headed in the right direction. However, you comments (or at least the way you phrase them), are a bit confusing. Has a Complaint under 523/727 been filed or has the creditor simply obtained an extension of the deadline in which to file such a Complaint?

    If an actual Complaint has been filed, you might want to begin your search for case law with the following. . .

    In re Intern. Fibercom, Inc., 283 B.R. 290 (Bankr.Ariz., 2002)

    While it dealt with litigation pending in another forum Judge Haines was quick to point out that “the purpose of the "pending litigation" rule would not be served by precluding discovery here. The reason for the rule is to avoid Rule 2004 usurping the narrower rules for discovery in a pending adversary proceeding. See, e.g., First Fin. Sav. Assoc. v. Kipp (In re Kipp) 86 B.R. 490 (Bankr. W.D.Tex 1988)(stating that once an adversary proceeding is initiated, a party to it "could no longer use Rule 2004 to obtain discovery relevant to the adversary"). However, the court holds the ultimate discretion whether to permit the use of Rule 2004, and courts have for various reasons done so despite the existence of other pending litigation (In re M4 Enters, Inc. (Bankr. N.D.Ga 1955)”

    So, while I have given you one case, although not in your jurisdiction, hopefully you can run with it. Just remember, it will ultimately be up to your judge.

    If an actual Complaint has not been filed, the sky is the limit. You might want to pull the following unpublished decision from your State. If you have access to PACER you can get a copy of the decision to see if it has any useful info.

    In re Thow, No. 05-30432 (Bankr. W.D.Wash. 12/14/2007) (Bankr. W.D.Wash., 2007)

    "Rule 2004 examinations are generally broader in scope than pre-trial depositions authorized under FRCP 26, being "in the nature of a fishing expedition." In re Apex Oil Co 101 BR 92, 102 (Bankr. E.D. Mo 1986)"

    Best of luck.

    Des.

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