If you are filing bankruptcy you are required to give an accurate listing of all assets, debts, income and expenses in the Voluntary Petition.
Sometimes a person does not want to list all their assets because they want to keep the asset. Let me give you a few of examples:
- Let’s say I want to keep a ring because it belonged to my Mother. I may be tempted to “forget” to list it on the petition. However, it would be far better to list the ring as an asset and protect it with one of my exemptions. The bankruptcy code in many states offers a large exemption so that it is rare that anyone loses any property if they list and exempt it.
- For example, let’s say I have a boat that’s free and clear of any debt. I may be tempted to transfer title of the boat to my son a few months before I file bankruptcy in order to “protect it”. This is called a fraudulent transfer if I am not paid in return the fair market value of the boat. I may be able to protect the asset with one of my exemptions if it is in my name. However after I transfer it I don’t own it and I lose the ability to protect it.
- Finally, let’s say I have a 401K valued at $150,000. This asset is fully protected and the trustee would not be able to seize the funds in order to repay debt(s).
The important thing to remember is to discuss you assets with your bankruptcy attorney in order to determine how to best utilize your exemptions and to prevent a fraudulent petition.
Likewise you are required to list all your debts. Sometimes a person may not want to list all their debts because they want to continue to pay or afraid the creditor may not allow them to keep a car:
- For example, let’s say I want to keep my car. If I list the debt and keep paying the payments, my car will generally not be repossessed by the lender. However if you fail to list the car note it will appear that you own the car free and clear and the Trustee may then want to take it. Listing the debt makes the petition clear and accurate.
- Second, let’s say I like my doctor and I want to continue to see her. I can list the debt in the bankruptcy and still make payments to her and continue to use her as my doctor.
There are other reasons to list all your debt:
- Notices are mailed to each creditor and once notice is received, they are not allowed to continue to try and collect on your debt.
- It is expensive to reopen a case and add a debt you forgot.
To summarize, the bankruptcy trustee must have an accurate picture of your financial situation. This means all the income, expenses, assets and debts must be listed. Be sure to discuss this with your attorney in order to prepare an accurate petition and protect as many assets as possible.