10 Reasons Why You Should Disclose Your Assets in Bankruptcy
Part of filing bankruptcy is making a detailed disclosure of assets owned. Here are 10 reasons, in no particular order, why not disclosing an asset to your bankruptcy attorney and in the official schedules is a bad idea.
- If you disclose an asset, your bankruptcy attorney might be able to devise an exemption strategy so that you can keep the asset openly.
- When you are found to have concealed an asset from the court, your options for preventing the loss of that asset will be extremely limited.
- If you do not disclose a cause of action or possible lawsuit, the future defendant may succeed in pleading judicial estoppel to bar your recovery.
- Non-disclosure of assets is grounds for denial of discharge. If your discharge is denied, you will have gone through bankruptcy for little benefit.
- You cannot back out of chapter 7 bankruptcy, and it can be difficult to back out of chapter 13 bankruptcy when acting in bad faith. It's a mistake to think you can "try it out" and turn around if you are "caught."
- In some situations, if your attorney finds out about an asset you haven't disclosed and won't disclose, it can create an ethical conflict that can lead to changes of representation in the middle of a case.
- Fraud on a bankruptcy petition is federal crime, prosecution for which could result in a federal jail sentence.
- Even a minor non-disclosure casts your case in an unfavorable light, and you will have more difficultly convincing the court and trustee that you are to be trusted on other matters in the case.
- Chapter 7 trustees have a personal financial interest in finding undisclosed assets, and are surprisingly creative in tracking them down.
- After a non-disclosure, you will be apprehensive at every creditor's meeting, hearing, and notice mailing. Aren't you seeking bankruptcy to remove stress from your financial life, not generate it?
We work carefully with debtors to ensure that they consider every sort of asset they might own, and counsel each debtor on how they can best achieve their property retention goals while obtaining bankruptcy relief in a legal and ethical fashion.
Updated December 13, 2011 to add judicial estoppel.