02 Oct Bankruptcy Basics: What Is Full Disclosure?
The very first post on this forum asked the question: “How Will The Trustee Know?” Written by Florida attorney, Chip Parker, the article stressed and really emphasized the need for honesty in bankruptcy schedules. The U.S. Bankruptcy Code provides that debtors seeking protection must “disclose” all their assets, all their liabilities, everything about themselves in order to get that protection.
Full disclosure means that you don’t have to ask the question, “do I need to mention this?” to your attorney—you have already told your attorney everything, even if the attorney has not asked the question. I cannot tell you how frustrating it is to sit in the hearings room with a client, whom I have asked many many times, in many different ways about their property, suddenly remember a significant asset while sitting in front of the chapter trustee. Our hearing room chairs are green. I call them the “green chairs of truth.” Oftentimes, with good legal advice, valuable assets can be saved or at least the value protected by changing the form of the asset.
Full disclosure means a debtor lists all income, from whatever source. Full disclosure means all debts are listed, even those to the family doctor, Aunt Mary, the corner drug store.
The benefit to the U.S. Bankruptcy Code is that large amounts of debt are discharged. This seems to be a fair exchange for having to “tell all” to the Court. Full disclosure means you don’t have to worry that the Trustee will find out about the asset you “forgot” to put on the schedules. Full disclosure means you don’t have to worry about federal charges being brought for bankruptcy fraud (lying on your bankruptcy schedules is a crime).
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