What Am I Required to Disclose in a Bankruptcy Filing?
What do you need to disclose when you decide it’s time to file for bankruptcy? One word says it all: Everything.
A mistake people sometimes make when filing for bankruptcy is not listing every possible creditor, or trying to hide property or other assets. Maybe you are unsure whether an inheritance you have not yet received is relevant to today’s court documents. Or you are trying to protect a family member or creditor you would like to pay back. Disclosing everything can help you avoid issues with your bankruptcy case and increase the chances of a successful filing.
Key facts to consider when filing for bankruptcy:
- List every creditor – every person or business who claims that you owe them money.
- List any money or other assets you might receive in the future, such as an inheritance, tax refund, life insurance, trust fund, stock options, retirement funds, and even judgments from lawsuits you have or may file related to a personal injury or other legal issues.
- List all of the properties and assets you own, including real estate properties, vehicles, businesses, financial accounts, stocks, investments, etc.
- Provide accurate information - including your personal identifying information, any previous bankruptcies, annual income, and that of your spouse if you are filing together.
- Do not fail to disclose creditors with whom you have a personal relationship to avoid having that debt wiped out. All creditors must be treated the same under the law.
- Do not attempt to hide assets. If the court discovers your deception, the penalties for fraud are serious, and jail time is not unusual.
Red Flags in Bankruptcy Filings
Bankruptcy trustees are experienced at identifying red flags that can help them identify potential fraud in bankruptcy cases.
This could be flat-out lying about not owning an asset or undervaluing an asset that you own. Bankruptcy trustees do a thorough review of your financial records and will be able to find out whether you have committed fraud.
Misleading Financial Records
If there are inconsistencies in your tax returns, misleading pay statements or financial accounts, that could be an indication that you are underreporting your income.
Recent Cash or Asset Transfers
Some individuals attempt to hide assets by transferring large sums to close family members or selling off assets in order to avoid reporting these assets in bankruptcy. This can amount to fraud and could create problems in your bankruptcy filing.
A red flag that can seem and feel innocent but lead to legal trouble in bankruptcy is something called “preferential payments.” If you borrow money from your parents to make a mortgage or car payment, for instance and then pay them back a year or less before filing for bankruptcy, you may have acted in violation of the bankruptcy code. Parents, friends, or other relatives, in the eyes of the law, are unsecured creditors and are no different than your Visa or MasterCard.
What Happens If I Accidentally Forget to Disclose Something?
Your intentions, even if they are honorable, are meaningless to the bankruptcy courts. Your bankruptcy papers are legal documents signed under penalty of perjury. Filing incomplete or inaccurate forms can mean your case will be dismissed or revoked – or worse. Dishonesty can lead to federal criminal charges if fraud is detected.
Make sure that you have an attorney help you through the paperwork process to ensure that nothing is left out to havoid creating suspicions of fraud.
Learn More About the Bankruptcy Process
At Martin Attorneys, PA, our goal is to help you regain control of your finances. To set up a free first meeting with us, please contact us.