Personal and Business Bankruptcy: Chapter 7, Chapter 11, Chapter 13
Sometimes it is tempting for a debtor in bankruptcy to hide assets from the bankruptcy trustee and court, which means not including them in the schedule of assets or schedule of exemptions and not telling the trustee about them. It may be because the asset is particularly important to the debtor and he/she doesn’t want to risk having it sold to pay debts. Or it may be because they think nobody knows about it and think they can out fox the bankruptcy trustee.
If you are filing for Chapter 7 bankruptcy and are tempted to leave assets off your schedules, just don’t. Bankruptcy procedures require debtors to sign a disclosure swearing that all assets are included in the schedules and take an oath to the same effect at the meeting of creditors. If you haven’t revealed all your assets and you sign the disclosure and take the oath, you are committing perjury and will suffer the consequences if you are caught.
Penalties for committing perjury include time in prison and/or hefty fines. Additionally, the bankruptcy will seize the asset and liquidate it to pay your creditors. You most likely won’t be allowed to amend your schedule of exemptions to apply exemptions toward the concealed assets once you are caught because you didn’t include them on the schedule of assets. In fact, the most sure way to have an asset seized is to attempt to conceal it. Bankruptcy trustees do their homework and you are likely to be found out.
Title 18 of the U.S. code provides for up to 5 years' imprisonment and $500,000 in fines and penalties for bankruptcy fraud. Other criminal provisions, such as false claims acts and perjury, carry even higher sentencing, fines and penalties.
Some unscrupulous debtors think they can outsmart the bankruptcy trustee if their hidden assets are discovered. The two most popular escapes that people attempt when facing perjury in bankruptcy charges are:
Telling the bankruptcy court that you told your attorney about the asset but the attorney said it didn't have to be listed or that the attorney failed to list it in the schedules is unlikely to work. Bankruptcy attorneys are required to have debtors read and sign a disclosure stating that you are aware that it is illegal not to include an asset in the schedules. Most bankruptcy attorneys also review bankruptcy schedules with the client prior to filing them to confirm that all assets are included. Every bankruptcy attorney takes steps to protect themselves against clients who try to hide assets.
Bankruptcy debtors do not have the right to dismiss their bankruptcy case just because they don’t want to complete the process. Once bankruptcy proceedings have begun, the debtor must show good cause for dismissing the case. Dismissal is less likely to occur if the trustee has just found concealed assets that can be sold to pay creditors.
The only legal way to protect assets from Chapter 7 bankruptcy liquidation is to apply one of the many available exemptions toward the asset. State and federal law allow bankruptcy debtors to keep certain types and quantities of assets after a Chapter 7 bankruptcy.
One of the most powerful and flexible exemptions is Maryland’s Wild Card Exemption. This exemption law allows a debtor to keep exempt up to $6,000 in cash or other property as well as up to $5,000 in personal property. Both parts of the Wild Card Exemption can be applied toward vehicles, real estate or any other personal property for a total of $11,000. If property is jointly titled (i.e. in both spouses names), couples may double the exemption for a total of $22,000.
Through strategic use of exemptions, an experienced bankruptcy attorney may actually help an honest client keep more property than the total value of exemptions allowed. This is because the full value of an asset doesn't necessarily have to be covered by exemptions. If enough of an asset’s value is exempted or encumbered by debt so that the remaining equity won’t yield a significant return for creditors, the bankruptcy is unlikely to force the debtor to sell the property. For example, if a debtor has a house that would bring $100,000 in a bankruptcy auction and the debtor still owes $70,000 on it, the debtor and his spouse could choose to apply their $22,000 Wild Card Exemption toward it for a total encumbrance of $92,000. The remaining $8,000 of value would not yield much for creditors after expenses for auctioning the house were paid. Therefore, the bankruptcy trustee is likely to let the couple keep the house.
You can read more about the Wild Card Exemption in Maryland Chapter 7 bankruptcies here: Chapter 7 Bankruptcy in Maryland: Using the Wildcard Exemption to Protect Your Car, Truck, Boat or Other Vehicle and Property.
If you’re considering filing for Chapter 7 bankruptcy but have important assets that you want to keep, rather than hiding those assets and hoping you don’t get caught, let an experienced bankruptcy attorney help you identify legal strategies for keeping those assets. In Maryland bankruptcy attorney John D. Burns and his firm have helped hundreds of Maryland and Washington D.C. resident keep their assets and resolve their debt and insolvency issues in Chapter 7 bankruptcy. Call our office at 301-441-8780 to schedule an appointment or e-mail us at firstname.lastname@example.org.