It wasn’t a week after my friend Fredrick’s presentation on due diligence for bankruptcy lawyers that the need for one of his tricks emerged. There seems to be an ethereal convergence about such things.
The client hadn’t revealed to the young lawyer bonuses that he had received in the means test look back period. The lawyer had a paystub for every period in the six months, but still missed this income. When pressed on the issue, the client disclosed some, but not all, of the irregular income. (The debtor’s failure to come totally clean is an issue for another day). The trustee had objected and the case was stalled.
Here’s where Fredrick’s double check would have exposed the client, and the problem: Fredrick takes the year-to-date income on the oldest paystub in the series, adds the gross income in the next paystub, and compares that sum to the year-to-date income in the pay stub in hand. The two numbers should match.
If the numbers don’t match, there is compensation paid between the two, apparently sequential pay stubs. It could be a bonus, a commission check, or benefits cashed out. But something was paid between those two payment advices if the arithemetic doesn’t check out.
The bankruptcy lawyer is then on notice that the whole story does not appear in the papers in hand. Back to the client for more information.
I have to say that lots about the presentation on due diligence seemed appropriate for a perfect world, where time and money are freely available; that isn’t where I practice. But this little exercise is cheap, easy and within the mathematical skills of a lawyer! What excuse is there not to be at least this diligent?
Image courtesy of antwerpenR.