It is critical that you properly list your assets while filing for bankruptcy. Serious consequences can fall to those debtors who fail to disclose or who significantly undervalue assets in the bankruptcy Petition and Schedules. Courts hold that the debtor has an absolute duty to report any interest they have in property, even if the debtor believes their assets may be worthless or unavailable.
Properly listing your assets is critical in bankruptcy!
At a minimum the failure to report an asset can mean the filer loses the asset. But in some cases, the failure to report an asset can result in the court denying a discharge outright or completely dismissing the bankruptcy case. If a bankruptcy discharge is denied, the debtor is never allowed to file again and will be unable to discharge the listed debts. Even worse, a debtor can be prosecuted for bankruptcy fraud. If convicted, the debtor may face fines and even prison time.
When in doubt, disclose
Here are some real life examples of consequences faced when debtors failed to properly list assets:
- The debtor failed to list a potential lawsuit and thus lost the cause of action and was also unable to sue after the bankruptcy.
- A Chapter 7 petitioner failed to report an insurance claim he had against his insurance company, thus he lost the right to collect the insurance proceeds.
- The debtor did not list assets. He consequently, didn’t exempt them. The non-exempt assets were turned over to the trustee.
- A bankruptcy filer failed to list money owed to him by the corporations he owned. His case was dismissed and he was denied a discharge.
- A Chapter 13 debtor failed to properly explain why he had $72,000 deposited into his bank account eight days after filing for bankruptcy. His request for discharge was denied.
- A debtor undervalued his interest in a corporation. The court found he purposefully hid assets. The case was dismissed and a discharge was denied.
Sit Down and Give it Some Thought
Think as expansively as possible about all property rights you may have when disclosing your assets to your attorney. If your assets show you don’t make you a good candidate for bankruptcy, then don’t file. But when in doubt, always disclose.