The problem that I see more often than not is that prospective bankruptcy debtors don’t understand this and in their minds, the only way to protect their property is to conceal it. This is a classic risk-reward scenario. What prospective bankruptcy clients don’t realize, however, is the number of ways their concealment can come to light. And if it is shown, then the bankruptcy court will come down hard on the debtor. A bankruptcy debtor is required to sign his/her petition under penalty of perjury, which can result in a fine or even prison time up to 8 years. In other words, there should be one price to filing bankruptcy: full disclosure.
In my experience, when a debtor is caught lying on his/her petition, the first result is that their discharge is revoked. Second, their exemptions are disallowed, which in turn, means that all their formerly exempted property can now be sold, including their house, furniture, and cars. Lastly, the bankruptcy court can request that the United States Attorney’s office open an investigation and even criminally prosecute the debtor. Needless to say, the consequences of lying on the bankruptcy petition are immense, illegal and not advised. While no one likes to have their property liquidated in a bankruptcy, more often than not, it’s a small price to pay for the discharge of all one’s debt. To put it in perspective, lying and getting caught could get all your property sold, leaving you with all your former debt, and even prison time.
The shame of it all is that most debtors that conceal assets or income would have never lost anything if they had simply disclosed it to their attorney. A wise attorney can counsel their client on whether the property is exposed and possibly pre-bankruptcy planning to avoid property loss.
FAQs
If the bankruptcy trustee discovers that you have hidden assets and you've concealed or failed to list assets to hinder, delay, or defraud creditors, the bankruptcy court will take action. For instance, the court could deny your discharge or take even more extreme measures (more below).
What happens if you hide assets from bankruptcies? ›
Hiding cash during Chapter 7 or concealing assets can result in criminal charges. Bankruptcy fraud is a serious crime. You can face felony charges for concealing assets in a bankruptcy case. Convictions for bankruptcy fraud include fines and prison sentences.
What happens if you lie about bankruptcies? ›
Legal Consequences
Bankruptcy fraud carries a sentence of up to five years in prison, or a fine of up to $250,000, or both. Even just intending to commit bankruptcy fraud may be punishable.
What are two negative consequences of declaring bankruptcy? ›
Some of the negative consequences include: Not all debts may be discharged. Non-exempt assets could be sold with the proceeds used to pay debt. Those who own luxury possessions probably will lose them.
What is concealment of assets? ›
When people fail to disclose assets they own, they can be criminally charged under federal law for concealment of assets. Nobody wants a bankruptcy case to turn into a criminal case, but this is what can happen when the government suspects that you are hiding assets.
How does a trustee find hidden assets? ›
The bankruptcy trustee is skilled at looking for any sign of hidden assets. The trustee might find hidden assets by reviewing your debts, public records, payroll deposits, bank records, and tax returns.
Can you lose your bank account in bankruptcies? ›
Most banks don't close a bank account in good standing after receiving notification of a bankruptcy filing. However, exceptions exist. For instance, credit unions tend to close accounts more often. Your local bankruptcy lawyer can explain the current trends in your area.
What is one major drawback of declaring bankruptcy? ›
Cons of Filing For Bankruptcy
It remains part of your credit record for up to 10 years, which is going to make borrowing during that time more difficult and expensive (higher interest rates). You probably knew that. If this were the only potential downside, it might be a no-brainer.
What can't you do after declaring bankruptcy? ›
For example, you can't discharge debts related to recent taxes, alimony, child support, and court orders. You may also not be allowed to keep certain assets, credit cards, or bank accounts, nor can you borrow money without court approval.
What is bad faith in bankruptcy? ›
A bad faith filing is one that is inconsistent with the purposes of bankruptcy or is an abuse of the bankruptcy system. However, the applicable Bankruptcy Code provisions regulating dismissal of a Chapter 7 petition will differ for different types of debtors.
Concealment is made up of three KEY principles: Grip tuck, slide tuck, and body placement paired with fabric drape. In this post we will discuss each of those principles, what they mean and how to apply them.
What are the three types of concealment? ›
There are three types of concealment: when someone doesn't say something they should, when someone lies to hide something, and when someone stays quiet when they should speak up.
What are the rules of concealment? ›
The concealment rule is a principle that says if someone does something to hide or keep a problem from being discovered, the time limit for taking legal action is paused until the problem is found.
How do I protect my inheritance from Chapter 7? ›
If you become entitled to receive an inheritance before filing for Chapter 7 bankruptcy, you'll have to "exempt" or protect it with a bankruptcy exemption to keep it. Additionally, unlike most other properties, a trustee can take an inheritance up to 180 days after you file.
Can creditors see your assets? ›
If a creditor successfully sues you in court and gets a money judgment against you, it will likely look for your assets and property. Once it finds your property, it can take steps to try to collect its judgment from that property.
How to protect land from bankruptcies? ›
Keeping Your Land Using Exemptions
You'll use bankruptcy exemptions to protect property regardless of the bankruptcy chapter you file. The homestead and wildcard exemptions are the two used most frequently to protect land.
Can debt collectors collect after bankruptcies? ›
Debt collectors cannot try to collect on debts that were discharged in bankruptcy. Also, if you file for bankruptcy, debt collectors are not allowed to continue collection activities while the bankruptcy case is pending in court. If a debt collector calls and you have filed for bankruptcy, tell the debt collector.
