When you file for bankruptcy you are essentially requesting that the Court system clear or discharge your current debts. During the bankruptcy process you will inform the Court of all of your debts as well as all your income and assets. Should you omit income or assets to make you look like a more favorable bankruptcy candidate? Absolutely not! If you omit any of your income or assets or not disclose all pertinent information you could be subject to criminal penalties and much more.
There are many reasons people hide income or assets in a bankruptcy. The most common and innocent reason is that they simply overlooked them. They forgot about a co-owned asset, awards from a lawsuit or pending lawsuit, lottery winnings, and interest from trusts or even retirement benefits. If an honest mistake happens correct the error immediately. You will not risk the associated penalties if you make the court aware of the omission as soon as possible and prove that you were not intending to defraud the bankruptcy court.
If you do not list all your assets or property in your bankruptcy filing and the trustee is made aware of it penalties can occur.
- Criminal charges could be filed
- Your discharge could be revoked
- Debts may not be discharged
If and when the bankruptcy trustee is made aware of omitted income or assets, the bankruptcy trustee will begin by filing a lawsuit or adversary proceeding against you in the same bankruptcy court. The bankruptcy trustee has up to one year after your bankruptcy is closed, and your debts are discharged, to file adversary proceedings against you. Bankruptcy trustees thoroughly review all cases to ensure the filings are accurate and compliant. While monitoring your case they will check public records, perform online asset searches, bank records, tax returns, and review your debts to ensure you have not omitted or left off any potential income or assets.
When a case is filed against you, a hearing will be scheduled and you will have the opportunity to plead your case or request a continuance to allow you to make the necessary changes. Should the bankruptcy judge find you omitted or concealed the income, property or assets with the intent to hinder, delay or defraud your creditors it will deny your discharge. When a bankruptcy discharge is denied or revoked you will be unable to list those debts in a subsequent bankruptcy. Since those debts will not be allowed in subsequent bankruptcy filings you will continue to owe the full amount of all of those debts.
Criminal charges can also be filed against you because you sign your bankruptcy schedules under penalty of perjury. What is a declaration under penalty of perjury in California? Essentially, when you sign a document under penalty of perjury you are attesting that the information in the document is true and accurate to the best of your knowledge. The penalty charge associated with perjury is a fine of up to $500,000 and / or up to five years of imprisonment.
The penalties associated with omitting income, assets or property is high and quite risky. When reviewing your bankruptcy papers, especially the schedules, make sure you have included all income, potential income, assets, property whether co-owned or not. And remember, if an omission happens due to an honest mistake, correct it as time is of the essence.