Written by Charleston Bankruptcy Lawyer, Russell A. DeMott
When you meet with your bankruptcy lawyer, you’ll have to fill out a fairly lengthy questionnaire about your finances. Among other things, you’ll need to tell your lawyer about your assets–property you have which must be disclosed, valued, and, if possible, claimed as exempt.
Some assets are readily apparent to clients. They know they have two cars, a house, furniture, some funds in the bank, an IRA, a 401(k), and so on. But this understanding seems to break down with understanding that any interest in any property must be disclosed. A prime example of this is with claims of various sorts: social security disability claims, personal injury claims, workers compensation claims, breach of contract claims, or interests in probate estates just to name a few.
Failing to disclose these interests–just like failing to disclose any assets in bankruptcy–can have disastrous consequences. The most serious would be criminal prosecution. In the last year, I’ve personally sat in on two hearings here in South Carolina involving young couples who I was convinced would be referred to the U.S. Attorney’s office for criminal prosecution. And in both cases, there was simply no need to lie about the assets at issue. Had they told their lawyer, the assets would have been exempt from the trustee or the lawyer could have advised them to wait to file their case. (There is nothing wrong with debtors spending down cash on normal living expenses prior to filing their case.) Sometimes, watching these “train wrecks” is just painful. So unnecessary and so sad. At the very least–if they are lucky enough not to be criminally prosecuted–these debtors will lose their discharge. And the bankruptcy discharge is the Holy Grail of the bankruptcy process. It’s the reason for filing bankruptcy in almost all cases.
As I’ve said over and over, tell your lawyer everything. Spend time on your questionnaire. Make it complete. The goal is to discharge debt–most of the time large amounts of debt. If you think you have a right to something (part ownership, a claim, some interest in a company) TELL YOUR LAWYER.
Postscript: I did two posts for Upstate personal injury lawyer, Trey Mills’ blog, The South Carolina Injury Law Journal. The posts, entitled, “Personal Injury Claims and Filing Bankruptcy” (Parts One and Two) explain in detail the bad things that can happen to your non-bankruptcy case is you fail to disclose claims in your bankruptcy case. The post could also be entitled, “Judicial Estoppel Bites!” To find out how NOT to get bitten, read part one by clicking here and part two by clicking here. Note also that Trey is selling his home in Downtown Greenville, South Carolina, so if you know anyone interested, point them to his blog post here. (I always try to help a friend when I can.)
Two other posts are worthy of mention as well. Jonathan Ginsberg, an Atlanta bankruptcy lawyer, just posted on consigned goods, Pay Pal accounts, and barter credits. As you see from his post, valuing these assets is an issue. Disclosing them is not. You put them on your schedules and then attempt to accurately value them. Check out his post here. In addition, you should read “Dangers of Not Disclosing Everything to Your Bankruptcy Attorney” by Texas bankruptcy lawyer Pamela Stewart.