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When It Comes To Bankruptcy, You Can't Hide The Details

by on 5/29/2014

On far too many occasions, I have seen a debtor get “caught” not fully disclosing everything. They felt that they were honest, but they did not take that extra step of disclosure, because they felt it really didn’t matter. The problem is simple: when it comes to bankruptcy, it all matters. Otherwise, the question would not be asked.

Trust Your Bankruptcy Attorney

Don’t fall into the trap of deciding for yourself what is or is not relevant to disclose when filing for bankruptcy. At the very least, you should always disclose everything to your attorney, and then let them advise you on the relevance of your disclosures. The reason being that once the trustee or court find that you failed to fully disclose something, it doesn’t matter how relevant or irrelevant the subject was; your entire case will be looked at with a fine-toothed comb, and you may be denied a discharge or worse charged with perjury.

3 Tips For Disclosing During The Bankruptcy Process

Let me give you three big hints:

  1. Almost every question is asked 2-3 times (in different ways) in the bankruptcy schedules. For example, let's say you state in your six-month income test that you donate $100 per month to charity. Well, you better have that expense listed in your ongoing budget (or explain why it's not there), and you better disclose charitable contributions in your statement of financial affairs.
  2. The trustee assigned to your case has access to the internet, and they can see everything the public can see on your social media pages and profiles. They also have access to Google Earth and can see a satellite photo of your home. One time, a trustee asked a debtor, “Do you own a boat?” The debtor responded, “No.” Then the trustee pulled out a printed satellite picture of their home, and there was a boat parked in the driveway. The debtor responded, "Oh, that is my son’s.” The trustee then asked, “Then why did you not disclose that in response to the question? Are you holding any property for anyone else?” The debtor replied, “I did not think it mattered.” Wrong answer. When it comes to bankruptcy, it all matters.
  3. You are required to send the trustee tax returns, pay stubs, and oftentimes bank statements. The trustee will review these documents to check that they are consistent with your bankruptcy schedules. I know of one debtor who was called in for additional questioning over a $25 charge from one of their statements. The $25 charge was for “fur storage”. But guess what? There was no fur listed on their schedules. That simple $25 charge led to the debtor losing their discharge and their fur coat. Unfortunately for them, their excuse of simply having forgotten they owned the fur coat did not fly.

Be Smart. Be Honest.

The lesson learned here is a fairly obvious one: disclose everything. Furthermore, if you are smart enough to realize that it's best to have a bankruptcy attorney help you through this process, then certainly disclose everything to them!