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When you file for bankruptcy protection, federal laws require you to disclose all of your assets, including those you own jointly with a spouse and contractual interests. The value of those assets is irrelevant; you still must report them even if they appear to have no value.
What Happens If I Don’t Disclose Something?
In Chapter 7 bankruptcy, the trustee can seize any nonexempt property that you have. If the trustee finds assets that you did not disclose, he or she can still take that property and sell it to pay your debts. Assets do not have to be listed to be subject to seizure.
If a trustee finds unreported assets in a Chapter 13 bankruptcy, the court can refuse to grant your discharge, which is the process that wipes out your debts, the whole point of filing bankruptcy. You lose protection from legal action, and you are once again fully liable for your debts.
You can be criminally charged with perjury if the court finds that you intentionally failed to report assets in your bankruptcy filing. Perjury means lying to the court. It carries a penalty of up to $5,000 in fines and up to five years in prison for each omission.
How Do I Correct an Omission?
If you unintentionally left off an asset, either because you forgot you owned it or you believed it to be worthless, you can ask the court to allow you to file an amendment, as long as the bankruptcy case is still active. The Motion to Amend will include a description of the asset and your explanation as to why you didn’t list it initially. The court can grant the motion and allow you to add the property or request more information and set it for a hearing.
If you have already been discharged from the bankruptcy, your case is considered closed. To amend the list of assets, you must ask the court to reopen your case so you can file the revised schedule of assets. If the court allows the amendment, the trustee may seize the omitted assets and sell them to repay creditors. The trustee or creditors can file their own motion if they believe you failed to report assets.
Bankruptcy is a serious and complicated legal matter to undertake. Even mistakes and omissions that seem minor can be costly. Consult a competent, experienced bankruptcy lawyer, like a bankruptcy lawyer in Memphis, TN, to make sure you understand and comply with all the necessary steps.
Thanks to Darrell Castle and Associates, PLLC, for their insight into filing for bankruptcy.