Some people filing for bankruptcy think that if they don't list property in their bankruptcy petition and schedules, they can dupe the trustee and keep the property. This is a huge mistake and also illegal.
Trustees Are Good at Finding Undisclosed Property
There is a good chance that the bankruptcy trustee will find property that you don’t list in your bankruptcy papers. Trustees look at bankruptcy schedules and statements every day. They get very good at picking out clues that tell them that something is missing. The trustee might get tipped off because of something in the schedules themselves, or the trustee might become suspicious because of information in tax returns or other financial records that you must provide. Often, something appears to be not right and this causes the trustee to dig further.
The trustee may check public records or use an Internet-based company to run asset searches to see if there is additional property, such as real estate or motor vehicles or boats that you have not disclosed. If you are trying to hide personal property like jewelry or antiques or collectibles, it is likely that someone who knows you will tell -- such as a creditor, or perhaps an ex-friend, ex-spouse or ex-coworker. Or, it might just be that the property is listed on a credit application or insurance documents.
What Happens If You Hide Assets?
If you do try to hide assets and get caught, the consequences are big. You can lose your discharge and lose the property. You will not be allowed to claim exemptions for that property, and if your discharge is denied for hiding assets, you will not be able to discharge the debts you listed in a subsequent bankruptcy filing.
For more information, check out Nolo's articles on Hiding Assets in Bankruptcy and Filing Bankruptcy? Disclose Everything, Hide Nothing.
The trustee is also required to make criminal referrals. The trustee reports bankruptcy crimes to the Office of the United States Trustee who, in turn, refers them to the appropriate agency, like the United State Attorney or FBI, for further investigation. The potential penalty for bankruptcy crimes includes fines and imprisonment for up to five years.