What happens if you do not disclose all of your assets when you file for bankruptcy? When filing for bankruptcy, you are required to disclose all assets and income. If you do not disclose all assets, including any recent transfers, your case may be dismissed and the court may impose criminal penalties – depending on the extent.
Filing for bankruptcy means that your financial situation is laid out for the court to assess. You are required to be truthful in your disclosures, including all debts, income, and any assets you hold. To get the courts to discharge your debts, you must show the court what means you have to repay them.
While you might be tempted to hide assets and avoid liquidating them, failing to disclose an asset during bankruptcy will result in a dismissal and you could be charged with a crime.
The Consequences of Not Disclosing Assets – It Is More Than Just a Dismissal
Assets, including any investment accounts or property in your name, must be disclosed during a bankruptcy case. Whether you just leave them off your disclosure, or you try to transfer them to someone else so that it looks as though you do not own them, leaving assets off your bankruptcy paperwork could result in:
- A denial of your case. You cannot discharge your debts if you lie on your bankruptcy paperwork. Failing to disclose all assets in your name will prevent you from discharging any debts or creating a court-approved repayment plan. Even debts that you are allowed to keep, you must disclose so that the court may verify that they are exempt. When your case is dismissed or denied, you will owe on all debts and creditors can continue collection actions against you.
- Your trustee may revoke your discharge status. If your debts were discharged, but it is later found that you hid assets during your bankruptcy, your trustee will request the court to remove that discharge. A trustee can do this for up to one year after you close out your bankruptcy case – so do not assume once it is closed you are safe.
- You will be unable to discharge those debts in a later bankruptcy case. Any debts that were in a bankruptcy case where your discharge was revoked, or the case was denied because you were hiding assets, are automatically barred from discharge in the future. That means you cannot re-file your bankruptcy case and include the previous case’s debts.
- The court may impose criminal charges and penalties. It is a crime to lie on your bankruptcy paperwork. By lying on the paperwork, you have committed perjury, which is a fraud crime punishable by up to 20 years imprisonment and a fine of up to $250,000. No matter the value of the assets you are trying to hide from the court, that punishment is not worth risking 20 years of your life to save a piece of property.
Would the Trustee Really Know I Hid Assets?
There are instances where a consumer will try to hide assets: lying about the assets themselves and just leaving them off their paperwork, transferring them into someone else’s name to hold on to while the consumer goes through bankruptcy, or moving assets overseas where they cannot be easily traced.
While there are many ways a person can hide assets, a trustee has just as many ways of finding those hidden assets. The bankruptcy court will appoint a trustee to your bankruptcy case, and this person reviews your assets, debts, and looks for any red flags that might indicate hidden assets. They are skilled, handle bankruptcies daily, and they have seen their share of assets hidden from the court.
Just some of the ways they can uncover hidden assets include:
- Looking at all debts and comparing them to assets listed. For example, you list numerous credit card debts for furniture, but your expensive furniture is no longer in your home, you have no record of sale, or you have no explanation for where the furniture went.
- Reviewing all public records for any asset transfers. For example, you own a piece of land that is not associated with your primary residence. To prevent adding it to your bankruptcy paperwork, you transfer it to a family friend to hold onto while you go through bankruptcy. Once your bankruptcy is over, you plan to transfer it back into your name. All land transfers are a matter of public record, which means the trustee would find that transfer.
- Reviewing your bank accounts and tax records to see if they line up with assets you have claimed. If you ever depreciated an asset in your taxes but you hide it during bankruptcy, the trustee will notice.
If a trustee finds that you have hidden assets from the court, they will then initiate an adversary proceeding. During this lawsuit hearing, the court will hear evidence on assets you hid from the court, and if they find you liable, your case will be denied and you could be charged with perjury.
The burden of proof in these cases is very low, and the court will take the evidence and testimony of a trustee to deny a bankruptcy case.
Can You Accidentally Forget an Asset?
Sometimes, a person legitimately forgets about an asset. If that is the case, then you should disclose it to the court immediately after you remember. The court will not deny your case or revoke a discharge if you disclose it to them and show that you did not intend to defraud or perjure yourself. For example, you forgot to list your retirement benefits, because you are not receiving them at the time of your bankruptcy.
Once you remember those assets, you should tell the court immediately and take corrective action. You want to disclose it before the trustee does.
Protect Yourself in Bankruptcy – Hire an Attorney
The process of filing for bankruptcy can be stressful. You are struggling financially while dealing with the stress of creditor harassment.
We can make sure you not only disclose all assets, but that you do not accidentally perjure yourself by filling out paperwork incorrectly.
To get started, schedule a bankruptcy consultation with our team by calling us today or requesting more information online.