State tax returns.
As mentioned in a previous post, Riverside Chapter 7 Bankruptcy Trustee Karl Anderson is a CPA. This knowledge of accounting allows the Mr. Anderson to quickly scan a tax return for the necessary information. One of the pieces of information that Mr. Anderson relies upon are the State Tax returns. These State Tax returns have what are known as “depreciation schedules”.
While I am not a tax person, I have been told that these depreciation schedules show when a business bought equipment and how much the equipment may be worth. Usually when a business files for bankruptcy, all the equipment is gone or repossessed. However, sometimes a debtor will forget to tell his attorney about equipment of the corporation or the business. This equipment is listed in the tax return, but not in the bankruptcy petition.
A bankruptcy Trustee like Mr. Anderson will then ask for the business equipment to be turned over if it has value. In the case of a small business with computers and furniture, the value may not be too much. But in the case of a failed construction company, the equipment may be big trucks and machinery. These items could be worth a substantial amount of money.
When a client debtor has a company. No matter what kind of company, review the State and Federal tax returns to check out each page of the returns for information that might have been left out of the bankruptcy petition. Filing bankruptcy is stressful for people and sometimes they forget to list everything in their petitions. The tax return serves as an independent verification of what the debtor owns and all that information must be in the bankruptcy petition.
Pay particular attention to depreciation schedules as they tell the bankruptcy trustee what was owned by the debtor and the schedules also can establish the value of those items.