23 Aug Do I Need To Disclose My Marijuana Stash To The Bankruptcy Court?
A topic that has been written about on this site on several occasions is the risk a client runs by failing to disclose all of his assets to his attorney when filing a bankruptcy. In articles by Jill Michaux, Chip Parker and Susanne Robicsek these risks are discussed, however the risk of being denied a discharge in bankruptcy cannot be overstated.
If a debtor fails to disclose an asset and a Court determines that the failure to disclose the asset had a material impact on the bankruptcy, the Court can deny the debtor his discharge.
I share the concern of my colleagues about these disclosure issues. So when a potential client asks me: “Do I have to disclose my stash to the bankruptcy court?” my answer is: “Yes, you have to disclose your stash!”
In the case of Fokkena, Trustee, v. George & Rose Tripp, 224 B.R. 95 (USBC, N.D. Iowa, August 3, 1998) the debtors were arrested and charged with the manufacture and possession of marijuana a few weeks after filing their Chapter 7 bankruptcy. The debtors did not disclose the fact that they owned marijuana on their bankruptcy schedules.
Both debtors ultimately plead guilty to charges associated with possession with intent to distribute the marijuana.
The trustee filed suit seeking the denial of the debtor’s discharge based upon the debtor’s failure to disclose their ownership of the marijuana on their bankruptcy schedules. The trustee maintained that denial should occur due to the debtor’s making a false statement under oath.
In an argument that would have been equivalent to the Mendez brothers seeking a lenient sentence for the murder of their parents due to the fact that they were orphans, the debtors took the position that their discharge should not be denied because the omission of the marijuana from their schedules was not material to their bankruptcy case.
The debtors argued that since the marijuana had no economic value which would be of benefit to their creditors (it would be illegal for the trustee to sell the marijuana), the fact that they made a false oath was not material.
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