Rule 2004 of the Federal Rules of Bankruptcy Procedure, notoriously referred to as the 2004 Examination, is usually used by a Bankruptcy Trustee and is similar to a deposition to a few caveats. 2004 Examinations have famously been referred to as a shipping expedition.
What Is a Rule 2004 Examination?
Rule 2004 of the Federal Rules of Bankruptcy Procedure states that “[o]n motion of any party in interest, the court may order the examination of any entity” regarding “the acts, conduct, or property or…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….”
Rule 2004 is very broad and loose. There are very few procedural safeguards or objections available to improperly posed questions. The main purpose of the 2004 Examination is to discover undisclosed assets, question transactions and determine if the debtor has committed any fraud.
Are there any Limitations at all?
Unfortunately, there are very few limitations on the types of questions asked and types of discovery used at a 2004 Examination. Questions cannot be objected to just because they are nothing more than a fishing expedition, which is why the 2004 Examinations are commonly referred to as fishing expeditions. The main limitation is simply that the questions asked and the discovery requested must at least be for a legitimate or justifiable purpose. To put it as simply as possible, the scope of the 2004 Examination can reach just about anything that has anything to do with the Debtor’s finances and/or property.
When is a 2004 Examination held?
First of all, it is important to note that the majority of bankruptcy cases filed do not include a 2004 Examination. 2004 Examinations are not a bankruptcy requirement. Instead, the Bankruptcy Trustee requests one only if he or she believes the debtor has additional assets that have not been disclosed, the Debtor has under-valued their assets, the Debtor made questionable transactions shortly before filing bankruptcy, or that the Debtor is being dishonest. 2004 Examinations are generally not scheduled, but if one is going to be scheduled it is generally not until after the 341 Hearing, or Meeting of Creditors, has been concluded.
While there might not be a lot of objections that can be raised during a 2004 Examination, it is still always helpful and a good idea to engage an attorney. An experienced bankruptcy attorney can help you properly prepare and make sure any objections that can be raised are raised. Having an attorney by your side can make the experience as stress-free as possible. Contact the Law Office of David M. Goldman, PLLC today at (904) 685-1200 for a free initial consultation.