No privacy in bankruptcy: data in the public record are there for anyone to see.EXECUTIVE SUMMARY * LAWS AND REGULATIONS PROHIBIT CPAs from disclosing clients' personal financial information, but bankruptcy statutes require that very same information to go into the public record. CPAs can't change the law, but they can help clients get through the bankruptcy process. * PUBLIC ACCESS AIDS THE ADMINISTRATION of bankruptcy cases, promotes public trust and accountability in the system and encourages legal compliance. Unfortunately, it also increases the likelihood of the debtor becoming a target of scams. * CPAs CAN HELP CLIENTS COPE with bankruptcy in a number of ways. They can inform them about the extent to which their personal and financial information will become public--and let them know that they must meet all the disclosure requirements of the bankruptcy statutes. * BANKRUPTCY ISN'T THE ONLY OPTION. Alternatives such as a nonstatutory contract to which both debtor and creditors debtor and creditor Respectively, a person who owes a debt and a person to whom the debt is owed. Usually the debtor has received something from the creditor, in return for which the debtor has promised to make repayment at a later time. consent give creditors a prorated share of their claims and discharge the debtor's balance. Other alternatives are an agreement to pay down debt over a longer time and credit counseling Credit counseling (known in the United Kingdom as debt counselling) is a process offering education to consumers about how to avoid incurring debts that cannot be repaid. This process is actually more debt counseling than a function of credit education. to negotiate debt-reduction terms. * MANY CLIENTS BOUNCE BACK. Being available, expressing a willingness to maintain a working relationship, answering questions, preparing financial documents and easing the aftershock af·ter·shock n. 1. A quake of lesser magnitude, usually one of a series, following a large earthquake in the same area. 2. are important functions for CPAs to perform. CPAs who help clients handle the bankruptcy process are trusted advisers in more than name. ********** CPAs who help clients make the details of their financial lives known to the court during a bankruptcy may understandably get headaches. The Gramm-Leach-Bliley Act The Gramm-Leach-Bliley Act, also known as the Gramm-Leach-Bliley Financial Services Modernization Act, Pub. L. No. 106-102, 113 Stat. 1338 (November 12, 1999), is an Act of the United States Congress which repealed the Glass-Steagall Act, opening up competition and related Federal Trade Commission regulations generally prohibit practitioners from disclosing clients' personal financial information. But bankruptcy statutes take precedence over those restrictions--and require that very same information to go into the public record. Can the conflict of individual right to privacy vs. statutory right to public access be resolved? Even with passage of the Bankruptcy Reform Act questions remain. CPAs who assist in a bankruptcy can present the issues and guide clients through the process professionally and compassionately. WHAT BANKRUPTCY DOES Bankruptcy is a judicial process to provide an individual or a business that no longer can pay its debts with relief from financial obligations. It distributes a debtor's property equitably among creditors and enables the debtor to start afresh a·fresh adv. Once more; anew; again: start afresh. afresh Adverb once more Adv. 1. . The most common bankruptcies are Chapter 7 liquidations, Chapter 11 reorganizations and Chapter 13 adjustments (sec "Bankruptcy Reform Is Here" page 51). In the bankruptcy process, debtors are required to submit a tremendous amount of information to the court. CPAs participate by providing a number of services, which can range from preparing financial documents on behalf of the debtor to helping the court-appointed trustee gather a debtor's financial records (see "The Business of Bankruptcy," JofA, Feb.02, page 35). The detailed information lists creditors, assets, liabilities and income, and any additional information explaining the debtor's financial situation. All of this is a necessary precursor to distributing assets equitably among the creditors (see "In the Public Record," page 62). Generally the public has the right to inspect documents filed with the bankruptcy court bankruptcy court n. the specialized Federal court in which bankruptcy matters under the Federal Bankruptcy Act are conducted. There are several bankruptcy courts in each state, and each one's territory covers several counties. . Both statutory and constitutional laws protect this access to court records, and section 107(a) of the bankruptcy code Bankruptcy Code may refer to:
If making the data available to the public serves as de facto [Latin, In fact.] In fact, in deed, actually. This phrase is used to characterize an officer, a government, a past action, or a state of affairs that must be accepted for all practical purposes, but is illegal or illegitimate. oversight by shining a spotlight on the process and inviting scrutiny, it also increases the likelihood of the debtor becoming a target of questionable schemes and scams. In limited situations the judge may decide to "seal" documents in the interest of privacy--for example, when reformation is scandalous MATTER, SCANDALOUS, equity pleading. A false and malicious statement of facts, not relevant to the cause. But nothing which is positively relevant, however harsh or gross the charge may be, can be considered scandalous. 4 Bouv. Inst. n. 4163. 2. and defamatory. The new Bankruptcy Reform Act expands judicial authority to restrict disclosure for additional reasons, including prevention of identity theft. THE PROBLEM WITH PUBLIC ACCESS Opponents of public access say debtors in bankruptcy are vulnerable to illegal, discriminatory and objectionable practices when personal data such as medical expenses and bank accounts are part of the court record. Technology exacerbates the exposure, since anyone anywhere can access electronic court records on the Internet. Those who prey on system weaknesses--such as identity thieves or bogus creditors--use the information, too. Debtors even may experience threats of physical harm, harassment Ask a Lawyer Question Country: United States of America State: Nevada I recently moved to nev.from abut have been going back to ca. every 2 to 3 weeks for med. , lender redlining Identifying text that has been changed in a word processing document by displaying it in a special color, for example. It allows the original author of the text or other users to see ongoing revisions. The term comes from manual editing where a red pen is used to mark up the pages. or discriminatory profiling. Disclosure of highly personal and sensitive data may possibly facilitate identity theft. A Federal Trade Commission survey found that nearly 10 million people were victims of identity theft during 2002, costing businesses and consumers billions of dollars. HOW CPAs CAN HELP CPAs can take a number of actions to help individual clients cope with bankruptcy. They can * Inform clients about the bankruptcy process. Clients need to know the extent to which their personal and financial information will become public. Some clients may be tempted to withhold certain financial information from the court. CPAs must let them know they have to meet the disclosure requirements of the bankruptcy statutes. * Tell clients to expect--and be wary of--solicitations. Once their personal information goes into the public record, clients likely will be deluged with offers for credit cards, goods, services and high-interest deals to reestablish credit. * Provide financial planning Financial planning Evaluating the investing and financing options available to a firm. Planning includes attempting to make optimal decisions, projecting the consequences of these decisions for the firm in the form of a financial plan, and then comparing future performance against ,. Clients may need long range advice to avoid financial difficulty and prevent further bankruptcies. * Be available for clients. Bankruptcy doesn't negate ne·gate tr.v. ne·gat·ed, ne·gat·ing, ne·gates 1. To make ineffective or invalid; nullify. 2. To rule out; deny. See Synonyms at deny. 3. a client's need for the services of a trusted adviser to reestablish credit, procure reasonable interest rates and prepare tax forms. * Be supportive when clients vent. Some clients may manifest shame, embarrassment and depression. If clients choose to talk about their distress, remind them that while bankruptcy may bring lifestyle changes, it provides some relief from financial pressures and its burdens are not permanent. * Suggest alternatives to bankruptcy. Filing for bankruptcy is not the only way to handle financial problems. There are alternatives such as a nonstatutory contract (a composition) to which both debtor and creditors consent; it gives creditors a prorated share of their claims and discharges an agreed-on balance. Another alternative is an extension that allows them to pay down debt over a longer period of time. * Suggest credit counseling. Credit counseling, from a for-profit or not-for-profit entity, can help debtors negotiate debt-reduction terms. CPAs can help them find a reputable source (see "Resources," below). * Make attorney referrals. Assist in finding the best bankruptcy lawyers for the client's situation. Besides offering counsel, attorneys can help the debtor negotiate debt-reduction terms with creditors. And networking with attorneys also can yield referrals for the CPA (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000. . * Stay in touch--and increase goodwill. Don't write off clients who go bankrupt. Many bounce back from insolvency and experience financial success. They, their family and their friends may appreciate your loyalty and give you business--and a great reputation. * Inform clients of postbankruptcy legal protections. Clients should be aware that laws Protect them. For example, the Federal Consumer Credit Protection Act The Consumer Credit Protection Act (15 U.S.C.A. § 1601 et seq. [1972]) is federal statute designed to protect borrowers of money by mandating complete disclosure of the terms and conditions of finance charges in transactions; by limiting the Garnishment of wages; and by regulating prohibits an employer from firing or discriminating against a client involved in a Chapter 13 bankruptcy whose wages are garnished. KEEPING A BALANCE Although the bankruptcy process turns personal data into public information, CPAs can help clients handle the stresses in a number of ways. Being available, expressing a willingness to maintain a working relationship, answering questions, preparing financial documents and easing the aftershock are important functions for the CPA to perform. The position of trusted adviser can be earned by being there in hard times, too. Room to Improve From October 1, 2003, to September 30, 2004, bankruptcies fell 2.6% to 1.6 million. Bankruptcies still remain at historic highs, well above the 1.5 million record set in 2002. Source: Administrative Office of the U.S. Courts, Dec. 3, 2004, www.uscourts.gov. In the Public Record This is a partial list of the financial information that goes into a debtor's public record. * Alimony alimony, in law, allowance for support that an individual pays to his or her former spouse, usually as part of a divorce settlement. It is based on the common law right of a wife to be supported by her husband, but in the United States, the Supreme Court in 1979 , maintenance, support and property settlements * Animals * Automobiles, trucks and other vehicles * Boats, motors and accessories * Books, pictures and art objects * Cash on hand * Charitable contributions charitable contribution n. in taxation, a contribution to an organization which is officially created for charitable, religious, educational, scientific, artistic, literary, or other good works. * Checking, savings and other financial account numbers * Current wages, salary and commissions * Description, location and market value of real property * Firearms * Food and clothing expenses * Household goods and furnishings * information related to dependents * Interests in insurance policies * Inventory * Jewelry * Laundry and dry cleaning dry cleaning, process of cleaning fabrics without water. Special solvents and soaps are used so as not to harm fabrics and dyes that will not withstand the effects of ordinary soap and water. Dry cleaning began in France about the middle of the 19th cent. expenses * Marital status marital status, n the legal standing of a person in regard to his or her marriage state. of debtor * Medical and dental expenses * Monthly rent or home mortgage payments * Names and addresses of creditors * Name and address of debtor * Name and age of spouse * Recreation, clubs and entertainment expenses * Security deposits * Social Security numbers (only the last four digits) * Sports, photographic and other hobby equipment * Stocks and bonds * Tax identification number * Utilities expenses * Wearing apparel PRACTICAL TIPS * Don't write off clients. Staying in touch increases goodwill. * Be available for clients. Bankruptcy does not negate the need for CPA services. * Provide clients with financial planning. Help them steer clear of future financial difficulty. RESOURCES AICPA AICPA See American Institute of Certified Public Accountants (AICPA). Resources * AICPA Professional Standards. * AICPA/CICA Trust Services Privacy Principle and Criteria, www.cpa webtrust.org. * AICPA Privacy Initiatives and Resource Center, www.aicpa.org/privacy. * Dealing With the IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. by Allen Brown (# 732261JA). * Consulting Services Special Report 03-1, Litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. Services and Applicable Professional Standards--2002 (# 055297JA). For more information or to order, call the Institute at 888-777-7077 or go to www.cpa2biz.com. Other Resources Collier on Bankruptcy (Matthew Bender, 15th ed., rev.), www.lexisnexis.com, 800-223-1940. Financial Privacy Resources * Privacy Rights Clearinghouse Privacy Rights Clearinghouse (PRC) is a project of the Utility Consumers' Action Network (UCAN), an American 501(c)(3) non-profit consumer advocacy organization. The Privacy Rights Clearinghouse is devoted to upholding the right to privacy and protecting consumers against identity 3100 5th Avenue, Suite B San Diego San Diego (săn dēā`gō), city (1990 pop. 1,110,549), seat of San Diego co., S Calif., on San Diego Bay; inc. 1850. San Diego includes the unincorporated communities of La Jolla and Spring Valley. Coronado is across the bay. , CA 92103 619-298-3396 www.privacyrights.org E-mail: prc@privacyrights.org * The Pacer Service Center (The federal judiciary's centralized cen·tral·ize v. cen·tral·ized, cen·tral·iz·ing, cen·tral·iz·es v.tr. 1. To draw into or toward a center; consolidate. 2. registration, billing and technical support center for electronic access to U.S. District, Bankruptcy and Appellate Court A court having jurisdiction to review decisions of a trial-level or other lower court. An unsuccessful party in a lawsuit must file an appeal with an appellate court in order to have the decision reviewed. records) PO Box 780549 San Antonio San Antonio (săn ăntō`nēō, əntōn`), city (1990 pop. 935,933), seat of Bexar co., S central Tex., at the source of the San Antonio River; inc. 1837. , TX 78278 800-676-6856; 210-301-6440 http://pacer.psc.uscourts.gov Consumer Credit Resource Consumer Credit Counseling Services (A division of Money Management International) 9009 West Loop South, Suite 700 Houston, TX 77096 800-873-2227; 713-923-2227 www.moneymanagement.org Web sites * www.uscourts.gov/bkforms/ bankruptcy_forms.html This site provides general information about filing a bankruptcy case, forms and a Bankruptcy Basics brochure. * www.totalbankruptcy.com This site offers a Debt Test to measure your risk, a free case evaluation and a time line of actions to take. Visitors can also read related articles and get an overview of Chapters 7 and 13. THERESA HOLT, JD, is an attorney and associate professor and PETER POZNANSKI, CPA, PhD, is an associate professor at the College of Business Administration, Cleveland State University Cleveland State University, at Cleveland, Ohio; coeducational; founded 1964, incorporating Fenn College (est. 1923). The Cleveland-Marshall School of law was incorporated in 1969. , Ohio. Their e-mail addresses are t.holt@csuohio.edu and p.poznanski@csuohio.edu, respectively. |
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