Don’t risk your bankruptcy discharge – list all your assets

20 Jan Don’t risk your bankruptcy discharge – list all your assets

If you file a bankruptcy case, you have to disclose all your assets. You have to show your bank statements to the bankruptcy trustee. You have to show your tax returns to the trustee too. It’s not as easy as you think to hide assets. Nobody will believe that you don’t have a checking account. Nobody will believe that you don’t have a savings account. That’s particularly true if you make even a middle-class income.

Today, I saw someone get into a world of trouble. He said, under oath, in his schedules that he had no bank account and no savings account. But the trustee found out that the debtor did have bank accounts. He got the bank records. He had over $8000 in the bank on the date he filed his bankruptcy petition. He also had a big tax refund coming which he neglected to mention.

This is a huge problem. What kind of bad things can happen to this debtor who was caught red handed lying to the trustee?

  • He will have to come up with that $8,000
  • He will have to give up his income tax refund
  • The trustee can make a criminal referral to the United States Trustee or the U. S. Attorney
  • The trustee can file a complaint to bar the debtor’s discharge of his debts in bankruptcy

Essentially, the debtor’s false statements under oath result in the worst of all possible worlds. He has a bankruptcy on his credit report for 10 years. He loses all of his non-exempt assets. He can’t get rid of the debts he had as of the date of his bankruptcy. And the he faces the risk of criminal prosecution.

My advice? Don’t let this happen to you. Tell your bankruptcy lawyer everything. Be honest. Don’t hide assets. Remember, in bankruptcy, an honest debtor can get a fresh start. A dishonest debtor can have all kinds of books thrown at him.

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Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.
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