Why hiding assets is a bad idea when filing bankruptcy
Bankruptcies | November 27, 2017
You have likely heard the expression that “Honesty is the best policy.” Not only is that true, but telling the truth is absolutely necessary when it comes to filing bankruptcy. Lying in a bankruptcy case is a violation of federal law, and if it is discovered the debtor did not include an asset or debt in their bankruptcy petition, their bankruptcy will not be discharged.
That is bad because the point of filing bankruptcy is getting debts discharged, meaning they will no longer be owed.
An undetected liar should not necessarily breathe a sigh of relief if their bankruptcy does get discharged. That is because a Trustee can seek the revocation of a discharge for up to a year after it was granted, if irregularities, such as hidden assets, are discovered. If a discharge is revoked because a debtor lied in their bankruptcy case, they will not be allowed to refile to try to get rid of those debts.
Just like everything a debtor owns must be listed in bankruptcy paperwork, all debts must be included. A debt not listed in a bankruptcy petition cannot be discharged, thereby defeating the purpose of pursuing bankruptcy in the first place. Fortunately, bankruptcy laws allow for paperwork to be amended even after it has been filed, although rules do apply to that situation.
But, of course, even with the best of intentions, sometimes people make mistakes. Human error is different than purposeful deception.
The experienced lawyers at Morgan & Morgan are trained to assist clients in evaluating their assets to maximize what they can keep under the law despite filing bankruptcy. And, if a client makes an honest mistake by inadvertently forgetting to list something in their bankruptcy schedules, we diligently work to get that error corrected immediately.