I’d like to talk with you today about fraudulent concealment and transfers when you file for bankruptcy. First, there is an inherent danger with undesirable outcomes when a debtor tries to conceal assets during bankruptcy. Secondly, anything you reveal to your bankruptcy attorney is under the attorney-client privilege. The point is, your attorney can’t help you file a successful bankruptcy without all the pertinent information. So, I encourage you to never lie or keep secrets from your bankruptcy attorney. I also invite you to continue reading to learn why full disclosure is so important during bankruptcy.
Why You Must Avoid Bankruptcy Fraudulent Concealment and Transfers
But, why do people think this is a good idea in the first place? The problem is, without the right knowledge, there are many reasons why a person might avoid disclosing information to their bankruptcy attorney.
Here are some examples of things to discuss with your attorney:
⎆ You Have an Asset You Want to Keep
Your bankruptcy attorney helps you plan and make the most of your bankruptcy exemptions. In fact, you might be able to keep cash, equity in your home, or your car, if your petition is accurate and the exemptions are properly applied.
Also, keep in mind that assets such as your 401K or retirement account get full protection by the bankruptcy code.
⎆ You Transfer Assets to a Friend or Relative
Many people think this is an effective way to protect an asset such as a house or car. However, if you transfer assets, it is in your best interest to tell your attorney. Then, he might advise you to wait or to transfer assets back. Then, your attorney gives you advice on how to proceed with your bankruptcy.
You normally have exemptions that allow you to keep most or all of your property. But you can only exempt property that is in your name. You also can’t exempt or keep the property that you transfer. Unfortunately, if the person didn’t pay you the fair market value for the property then the trustee might be able to take it. Usually, giving away property is the worst strategy possible for your bankruptcy.
⎆ You Make a Large Charge on a Credit Card
It’s not a good idea to make a large purchase just before filing bankruptcy. If you do, sometimes lenders file an adversary proceeding claiming you made a large purchase knowing you would be filing bankruptcy soon or that you would be unable to pay. If they are successful, they may obtain a judgment that the amount you charged just before filing is still due and owing. Then, you may have to repay for the item.
However, some purchases, such as a house or car repairs are easy to explain. By being open and honest with your attorney, he then helps you formulate a plan on how and when to avoid or settle such a claim if one arises.
Before You Commit Fraudulent Concealment, Speak to Your Attorney
This list is not exhaustive but it explains some of the problems we commonly run into. Always be completely truthful with your attorney and openly talk about your goals in filing bankruptcy and questions. Your bankruptcy attorney will ask many questions as the process continues.
Be sure to answer all questions fully and honestly and do not hold back information. In fact, be honest even if it embarasses you or you think it’s unimportant. Moreover, a creditor or trustee most likely knows the information you try to hold back anyway.
Remember, your bankruptcy attorney is best able to assist you if you tell him all the facts upfront. Also, remember that fraudulent concealment and transfers are not conducive to a successful bankruptcy.
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If you are facing bankruptcy, don’t delay because timing is crucial. I am here to help you. So, contact my office right away to start the conversation. Nick C. Thompson, Bankruptcy Lawyer: 502-625-0905