The basic tenet of bankruptcy law is that bankruptcy is a process designed to give an honest debtor who has made bad financial decisions, or who has been the victim of bad financial misfortunes, an opportunity to responsibly erase all or part of their overwhelming debts in order to get a fresh financial start.
The system does not work unless the debtor enters into the process with the intent to resolve their financial problems with complete honesty and transparency with the bankruptcy trustee, the creditors, and the court.
Violation of this trust by intentionally hiding assets can have dire consequences for anyone seeking bankruptcy protection from their creditors.
In order for the trustee and the court to fairly judge your debt and your ability to play, it is critical that a debtor list all assets.
This is why a debtor is asked to give a total, truthful accounting of all assets.
In return, the court agrees to discharge, or erase, part or all of the debt through a discharge or a payment plan.
When debtors intentionally hide assets, courts can vacate the discharge, either immediately, or, if the case has been discharged, up to one year after the discharge.
Alternatively, if the asset is secured by a loan, the judge can decide to withhold that loan from any relief or protection offered under the payment plan.
In addition, any debt attached to any hidden asset will be exempt from any future bankruptcy filing. This means that the debtor can never seek bankruptcy relief for that debt.
However, the civil penalties pale in comparison to the criminal penalties.
When you file for bankruptcy, you are certifying under penalty of perjury that the asset list is a complete and honest accounting of all assets.
Concealing property and not including it on the asset list is considered perjury and can be punished with a $500,000 fine, five years imprisonment, or both.
However, it is important to keep in mind that simply forgetting to list an asset — such as an inheritance, retirement benefits or proceeds from a trust – are not as serious as intentionally misleading the court and concealing assets.
If a debtor can prove that a good and honest effort was made to disclose all assets, the courts will normally show a bit of leeway for them.
If you have any doubts concerning your asset list, you should discuss them with your bankruptcy attorney as soon you learn of any possible discrepancy on your asset list.
Bankruptcy can be daunting, and to succeed, you need competent, experienced legal representation to guide you through the process.
Contact us if you have question about bankruptcy.