When you file for bankruptcy, you’re putting yourself under a spotlight. Hide assets or refuse to cooperate and you could end up getting in a whole mess of trouble.
Take, for example, Denny Hecker.
Denny filed a Chapter 7 bankruptcy case in Minnesota.
The trustee demanded certain documents from him, but Denny refused. Denny is now sitting in a jail cell in Oklahoma, convicted of bankruptcy fraud.
This, after his Chapter 7 trustee asked the court to find him in contempt.
Here’s how to avoid being like Denny Hecker.
Bankruptcy Requires Disclosure
When you file for bankruptcy, you’re required by law to disclose all assets and all debts. You’ve also got to provide information about certain past financial transactions.
These rules exist so that the court can be sure that your creditors are treated fairly. After all, you’re looking to wipe out your debts and reorganize your finances – it’s all a matter of quid pro quo.
As Robert Heinlein famously said, there’s no such thing as a free lunch.
Property Means More Than The House
If we ever sit down to talk, I’m going to ask you about your property.
And if you’re like most of my clients, you’ll think I’m talking about real estate. You’ll be wrong.
Property, in the world of bankruptcy, includes everything you own. That means real estate and cars, but also bank accounts, furniture, clothing, jewelry, cash, coin collections, that treasure trove of old comic books … everything.
And that property has value. Some of it may not have a lot of value (for example, not many people will pay you a a ton of money for your old socks) but the value doesn’t determine ownership.
Disclose it all or there’s trouble down the road.
Financial Information Requires Documentation
Your financial books and records tell the true story about what you’ve been doing over the past bit of time. Sometimes, your bankruptcy trustee will ask that you hand it over.
That financial information includes bank account statements, credit card statements, tax returns, closing documents from the sale of real estate and business property, and more.
You won’t be required to turn over everything in every case, but when you file for bankruptcy you should expect that your ducks should be in a row.
The Downsides Of Failure To Disclose
If you fail to disclose all of your assets and debts, your bankruptcy case may be thrown out of court.
If an asset isn’t disclosed and the bankruptcy case isn’t thrown out, you lose your right to the property. That includes the undisclosed personal injury lawsuit, by the way.
And if you have been found to have concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information, including books, documents, records, and papers then your bankruptcy discharge may be denied.
Worse still are the potential criminal penalties. We won’t go into that here, buy suffice to say you probably don’t want to be wearing an orange jumpsuit (in spite of the fact that orange is the new black).
I Can Protect You Now – But Not Later
If you tell me about something before your bankruptcy case is filed, I can help you work through the potential issues. But once the wheels are in motion, there’s no way to turn back the hands of time.
Problems can be solved or avoided entirely before the case is filed. If not, then we simply don’t file your bankruptcy case.
But once filed, your problems become set in stone.
Best to tackle the issues while you’ve still got some wiggle room.
Photo courtesy of Ariela Beal.