Why Hiding Assets in a Bankruptcy is Always a Bad Idea
Whenever you file for bankruptcy in New York City, you are required to tell the courts about any assets that you may have. In some types of bankruptcy, assets are seized and sold to pay off a percentage of debt. There are certain types of assets that are exempt, but typically most of a person’s assets that aren’t necessary to survive will be used in this process.
However, in rare cases, some courts will allow a person with very few or no assets to file this type of bankruptcy, which means that the collectors will get nothing, and all debts will be wiped clean. It is one of the few times when a person can truly be rid of debt, legally, without paying any percentage of it back.
Because this is something that can happen – regardless of how rare it truly is – some people try to hide their assets in order to keep them from being seized. From putting property in family member’s name, to giving family heirlooms to other members of the family, to outright hiding or lying about assets, there are many ways that this is attempted. But it is always a bad idea – and here’s why.
What is Exempt?
First, let’s talk abut what it is that people try to hide on bankruptcy filings. Certain property is exempt from seizure, so it makes no sense to try to hide it. That includes things like:
- Vehicles up to a certain value
- Household appliances
- Public benefits
- Personal injury damage awards
- A portion of unpaid earned wages
- Reasonably necessary clothing and household goods
- Jewelry up to a certain value
Things that aren’t exempt, and which many people try to hide include:
- Family heirlooms
- Second vehicles
- Vacation homes
- Bank accounts
- Stocks and bonds
- Valuable collections
- Musical instruments of value
- A portion of home equity
- Retirement benefits
- Lotto winnings
- Co-owned assets
- Rewards from other types of lawsuits
These things can be seized in order to pay back debt in a bankruptcy filing. What happens when people try to hide them?
Hiding Assets: A Bad Idea
When a bankruptcy is filed, the person or couple is assigned a trustee. This trustee oversees every portion of the bankruptcy, including the investigation into assets. Trustees are experienced in looking through old records and gathering information on what you’ve owned in the past. They’ll use online searches, tax returns, bank records, family wills, and many other things to find out what you probably own.
If they show that something was not disclosed, but it was done accidentally or out of confusion, there are usually no consequences. The proceedings will be slowed down, but generally a simple mistake will not result in a denial.
However, if it is suspected that the exclusion of allowed property was on purpose, to prevent it from being seized, it is very likely that your request for a bankruptcy ruling will be denied. This means that you’ll be stuck dealing with creditors on your own, and may be barred from filing again for a length of time.
If it is discovered that assets have been moved to other names directly prior to filing bankruptcy, the same denial could apply. In every case, it is a bad idea to leave out this information, because it means that your debtors will now be within their legal rights to take you to court themselves for a ruling on your debts.
The best course of action if you want to keep as many of your assets as you can is to contact an experienced bankruptcy lawyer in NYC. You can get a free bankruptcy consultation at our office by calling 212-244-2882.