Many debtors hold off on filing for bankruptcy because they fear that their assets will be seized and sold to pay off their creditors. It's a reasonable fear, and also true that some assets may be subject to seizure and sale.
However, it is also possible for debtors to hold onto much of their property in a bankruptcy. For instance, if you file for Chapter 13 bankruptcy, there is no asset seizure and additional time to pay off your creditors. But even when filing a clean-slate bankruptcy Chapter 7, many assets may be exempt from seizure.
What if I don't list all my assets?
Those in a financial bind sometimes think that no one will be the wiser if they leave off some salient details of the assets they own or possess. They believe that it will be impossible to uncover things they don't declare.
In some cases, they may be right. Not all cases of bankruptcy fraud are detected. But is it really worth the risk to cross the line from debtor to felon? Because that is what you become when you hide assets in a bankruptcy.
Trustees have ways to find hidden assets
The application form that you first filled out when filing for bankruptcy might be the tip-off that you are not being forthcoming about all that you own. Trustees look to the information you provided about your income, expenses, financial history, liabilities and assets.
That, in turn, is matched against statements from creditors, tax returns, lawsuits, bank statements, pay stubs and other relevant documents for at least the past year. When discrepancies turn up, the trustee knows it's time to dig even further.
What can be revealed
Suppose it was an unaddressed gambling addiction that led to your present financial woes. By examining your cash advance history, a trustee may notice multiple late-night withdrawals from casinos or off-track betting sites. They can then insist upon your signing voluntary self-exclusion forms to prevent your gambling at any casinos.
Suspicious purchases of expensive electronics that you fail to declare could result in your being accused of making the purchases solely to sell the items later for cash. Then, the trustee will file an opposition to your bankruptcy discharge.
Other ways you might get caught
Consider what your bank statements and credit card receipts can reveal. Were you making rental payments to a marina for a boat you somehow forgot to declare? Busted.
Unless you paid cash for luxury items you purchased but didn't list — often a red flag — there is a record out there of the purchase you made, and it's the trustee's job to find it.
Don't wind up in jail over false filings
Yes, you might outsmart the trustee. But there is also the chance that you might wind up in federal prison, too. It's far better to be forthright with your Memphis bankruptcy attorney and let them provide you with the legal guidance that can offer you the best financial future possible.